Standard Oil Company

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STANDARD OIL COMPANY

STANDARD OIL COMPANY, an Ohio corporation, was incorporated on 10 January 1870 with a capital of $1 million, the original stockholders being John D. Rockefeller, with 2,667 shares; William Rockefeller, with 1,333 shares; Henry M. Flagler, with 1,333 shares; Samuel Andrews, with 1,333 shares; Stephen V. Harkness, with 1,334 shares; O. B. Jennings, with 1,000 shares; and the firm of Rockefeller, Andrews and Flagler, with 1,000 shares. The company took the place of the previous firm of Rockefeller, Andrews and Flagler (formed 1867), whose refineries were the largest in Cleveland and probably the largest in the world at that time. The company immediately made important extensions. These refineries, superior efficiency, and the threat of the South Improvement Company led Standard Oil to swallow practically all rival refineries in the Cleveland area in 1872.

Coincidentally with the conquest of Cleveland, Standard Oil began reaching out to other cities. In 1872 it bought the oil transporting and refining firmof J. A. Bostwick and Company in New York; the Long Island Oil Company; and a controlling share of the Devoe Manufacturing Company on Long Island. In 1873 it bought pipelines, the largest refinery in the oil regions, and a half interest in a Louisville refinery. The acquisition of the principal refineries of Pittsburgh and Philadelphia was carried out in 1874–1876, while in 1877 Standard Oil defeated the Pennsylvania Railroad and the Empire Transportation Company in a major struggle, taking possession of the pipelines and refineries of the latter. Another

war with the Tidewater Pipeline resulted in a working agreement that drastically limited the latter's operations. By 1879, special agreements with the railroads along with strategic use of pools allowed Standard Oil, with its subsidiary and associated companies, to control 90 to 95 percent of the refining capacity of the United States, immense pipeline and storage-tank systems, and powerful marketing organizations at home and abroad.

While Standard Oil of Ohio remained legally a small company with no manufacturing operations outside its state, it was the nucleus of an almost nationwide industrial organization, one of the richest and most powerful in the country. Its articles of incorporation had not authorized it to hold stock in other companies nor to be a partner in any firm. After trying a variety of other methods to skirt the company's articles of incorporation, Standard Oil finally overcame this restriction by acquiring stocks not in the name of Standard Oil of Ohio but in that of a prominent stockholder named as trustee. Flagler, William Rockefeller, Bostwick, and various others served from 1873 to 1879 as trustees. Then, in 1879, the situation was given more systematic treatment. All of the stocks acquired by Standard Oil and held by various trustees, and all of the properties outside Ohio in which Standard Oil had an interest, were transferred to three minor employees as trustees. They held the stocks and properties for the exclusive use and benefit of Standard Oil's stockholders and distributed dividends in specified proportions. But while this arrangement was satisfactory from a legal point of view, it did not provide sufficient administrative centralization. On 2 January 1882, therefore, a new arrangement, the Standard Oil Trust Agreement, set up the first monopoly trust in American history. All stock and properties, including that of the Standard Oil proper as well as of interests outside Ohio, were transferred to a board of nine trustees, consisting of the principal owners and managers, with John D. Rockefeller as head. For each share of stock of Standard Oil of Ohio, twenty trust certificates of a par value of $100 each were to be issued. The total of the trust certificates was therefore $70 million, considerably less than the actual value of the properties. Standard Oil's huge network of refineries, pipes, tanks, and marketing systems was thus given a secret, but for the time being satisfactory, legal organization, while administration was centralized in nine men, with John D. Rockefeller at their head. The new arrangement allowed Standard Oil Trust to integrate the industry horizontally by combining competing companies into one and vertically by controlling petroleum from its production to its sale.

Standard Oil's growth in wealth and power drew the awe of other corporations and the criticism of social critics, most notably muckraker Ida Tarbell, who wrote the scathing "History of the Standard Oil Company" in McClure's magazine in 1902. By the time of Tarbell's publication, social criticism was just one of many forces checking Standard Oil's power. The gusher at Spindletop in Texas in 1901 had prompted a flood of new oil companies along the Gulf coast, and they, along with new companies in California and the Plains states, reduced Standard Oil's dominance. Legal challenges beset Standard Oil as well. In 1892, as a result of a decree by the Ohio courts, the Standard Oil Trust dissolved, and the separate establishments and plants were reorganized into twenty constituent companies. But by informal arrangement, unity of action was maintained among these twenty corporations until 1899 when they were gathered into a holding company called Standard Oil of New Jersey. In 1906 the federal Bureau of Corporations filed a report on Standard Oil's operations in Kansas that led directly to a federal antitrust suit against Standard Oil in the U.S. Circuit Court for the Eastern District of Missouri. Three years later, the court ruled against Standard Oil, and in 1911 a decree of the U.S. Supreme Court upheld the ruling. The historic 1911 decision broke up Rockefeller's company into six main entities: Standard Oil of New Jersey (Esso, now Exxon), Standard Oil of New York (Socony, now Mobil), Standard Oil of Ohio, Standard Oil of Indiana (now Amoco, part of BP), and Standard Oil of California (now Chevron). Rockefeller remained nominal head of Standard Oil until 1911, but by 1895 he had surrendered more and more of the actual authority to his associates.

BIBLIOGRAPHY

Hidy, Ralph W. History of Standard Oil Company (New Jersey). New York: Arno Press, 1976.

Wall, Bennett H., et. al. Growth in a Changing Environment: A History of the Standard Oil Company (New Jersey),1950–1972 and Exxon Corporation, 1972–1975. New York: Harper and Row, 1988.

Williamson, Harold F. The American Petroleum Industry. Evanston, Ill.: Northwestern University Press, 1959.

Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon and Schuster, 1991.

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