Biographies & Memoirs

CHAPTER 9

The New Monarch

Fresh from the South Improvement Company brouhaha and the bruising struggle over the Cleveland refineries, Rockefeller didn’t pause to catch breath. Anybody else might have consolidated his gains and proceeded cautiously, but Rockefeller, a man in a hurry, launched a new offensive instead. The SIC contretemps had stranded him in an untenable spot. Since Cleveland refiners paid the same freight rates as other refining centers, they labored under a huge competitive handicap, paying fifty cents a barrel just to ship crude oil to Cleveland before sending on the refined oil to New York; by contrast, a Titusville refiner shipped straight to the seaboard. In April 1872, Henry Flagler again extracted concessions from the Lake Shore Railroad but not enough to appease Rockefeller. Because the Pittsburgh refiners shared a similar cost disadvantage, Rockefeller decided to make common cause with them and press the railroads for new discounts.

With unmitigated cheek, Rockefeller decided that if the Oil Regions couldn’t tolerate a small, secret consortium such as the SIC, he would confront them with a giant public consortium of refiners. In mid-May 1872—scarcely more than a month after the railroads scrapped the SIC—Rockefeller and Flagler journeyed to Pittsburgh to meet with the city’s three foremost refiners, William G. Warden, William Frew, and O. T. Waring. The group then went by train to Titusville, bearing a plan for a new National Refiners’ Association, which would be popularly dubbed the Pittsburgh Plan. This venture envisioned a new refiners’ cartel, headed by a central board that would negotiate advantageous terms with the railroads and maintain prices by assigning refining quotas to members. Eschewing subterfuge, the confederation was thrown open to all refiners, but with John D. Rockefeller serving as president.

Before long, Rockefeller was so detested in the Oil Regions that he ceased to visit and retreated to the status of a dim, shadowy legend; no authenticated photo shows him in the rural backwater to which he owed his fortune. Though the National Refiners’ Association theoretically embraced all comers, the Titusville refiners saw the group as the old SIC in disguise, and local newspapers admonished oilmen to beware of the slippery, smooth-talking men from Cleveland. On the Titusville streets, Rockefeller was greeted with the somber respect accorded a new monarch. As always, he presented a cordial façade that disarmed people and in one office after another reassured wary refiners, “You misunderstand our intention. It is to save the business, not to destroy it that we are come.”1 At two turbulent public meetings, Flagler was hooted and jeered while Rockefeller stared impassively at the audience. One refiner left an indelible portrait of Rockefeller’s aloof, cryptic manner at a private meeting:

One day several of us met at the office of one of the refiners, who, I felt pretty sure, was being persuaded to go into the scheme which they were talking up. Everybody talked except Mr. Rockefeller. He sat in a rocking chair, softly swinging back and forth, his hands over his face. I got pretty excited when I saw how those South Improvement men were pulling the wool over our men’s eyes, and making them believe we were all going to the dogs if there wasn’t an immediate combination to put up the price of refined and prevent new people coming into the business, and I made a speech which, I guess, was pretty warlike. Well, right in the middle of it John Rockefeller stopped rocking and took down his hands and looked at me. You never saw such eyes. He took me all in, saw just how much fight he could expect from me, and I knew it, and then up went his hands and back and forth went his chair. 2

At a second big public meeting, the Pittsburgh Plan was defeated resoundingly by local refiners, yet Rockefeller still gained ground, having enlisted influential local defectors, especially his erstwhile foe, young John D. Archbold. During the following months, in a divide-and-conquer policy, Rockefeller tried to isolate the Oil Creek refiners by successfully recruiting into his Pittsburgh Plan refiners from the other major centers.

But before long, this cartel was bedeviled by cheaters exceeding their quotas. It also grappled with what economists call the “free rider” problem—that is, opportunistic refiners stayed outside the plan and enjoyed the higher prices it produced without being bound by its production limits. As Rockefeller later said in a comparable situation, “These men who claimed that they had been ‘crushed’ and ‘ruined’ by the Standard Oil Company were existing under its shelter and protection.”3 And he was besieged by problems closer to home. After Standard Oil bought decrepit old refineries in Cleveland to cut back on capacity, many sellers violated their covenants and started up new plants with improved equipment. They were drawn back, Rockefeller argued, only because he had markedly improved conditions and boosted prices. To complicate matters, new refiners now entered the business expressly to blackmail him into buying them out.

In the end, frustrated by rampant cheating and freeloaders, Rockefeller gathered refiners in Saratoga Springs, New York, on June 24, 1873, and dissolved the short-lived Pittsburgh Plan. He was momentarily disheartened by this failure, which again confirmed his preference for outright fusion rather than an unwieldy federation of firms. “There are some people whom the Lord Almighty cannot save,” he later said wearily of the Oil Creek refiners. “They don’t want to be saved. They want to go on and serve the devil and keep on in their wicked ways.”4

In her influential polemic, Ida Tarbell evoked a paradise of free, independent producers in western Pennsylvania, “ruddy and joyous” men, enamored of competition, who were snuffed out by the sinister Standard Oil. In her morality play, Rockefeller was the venomous toad in this garden of earthly delights. In fact, the producers didn’t respond to Rockefeller by advocating freer competition but by forming their own counterconspiracy. In the summer of 1872, under the aegis of the Petroleum Producers’ Association, they approved a moratorium on new drilling to steady prices and briefly called for a complete halt to production. The producers terrorized each other, meting out noctural punishment to noncooperators by setting their wells ablaze or smashing their pumping engines with sledgehammers. The producing end of the industry was populated by thousands of freebooting, high-spirited speculators who were far harder to organize than the more sober refiners, concentrated in a few urban centers—something that gave Rockefeller a decided edge.

So long as he could maintain ample spreads between crude and refined prices, Rockefeller blessed the producers’ efforts to impose higher prices and control output. It was a common misconception along Oil Creek—and one that fed anti-Rockefeller demonology—that he was trying to drive drillers to the wall to keep prices low. In reality, he was fully prepared to deal with a strong producers’ cartel so long as they capped production. On December 19, 1872, Rockefeller met with producers at the Fifth Avenue Hotel in New York and signed the so-called Treaty of Titusville. Under this agreement, the refiners’ association pledged to buy oil from the producers’ association at five dollars a barrel—nearly twice the spot market rate—in exchange for tightly enforced production limits. The agreement crumbled not because of Rockefeller but because producers couldn’t enforce discipline in their ranks. Instead of throttling the oil flow, they scrambled to pump more, with wholesale cheating driving the price as low as two dollars a barrel on the crude-oil market. Many small drillers outside the producers’ association took advantage of the pact to undersell their bigger competitors.

This behavior ratified Rockefeller’s low opinion of the producers as dissolute, unreliable men who couldn’t contain a “wild and uncontrollable element” that “would sneak out at midnight and start the pumps going so that the oil might flow before the songs of the birds were heard.” 5 With the the oil industry drowning in another glut, Rockefeller terminated the agreement in January 1873, chiding the recalcitrant producers: “You have not kept your part of the contract—you have not limited the supply of oil—there is more being pumped today then ever before in the history of the region.”6 While uncontrollable drilling was to blame, the producers found it easier to scapegoat Standard Oil. After the agreement fell apart, the disorganized producers lost all incentive to curtail production, feeding another downward spiral in oil prices.

By 1873, Standard Oil was shipping about a million barrels of refined oil per year and earning about a dollar a barrel, yet the business remained on an unsure footing. Rockefeller had clarified one thing in his own mind, however: Voluntary associations couldn’t move with the speed, unity, and efficiency he wanted. “We proved that the producers’ and refiners’ associations were ropes of sand,” he said.7 He was now through with ineffectual alliances and ready to bring the industry to heel under Standard Oil control. “The idea was mine. The idea was persisted in, too, in spite of the opposition of some who became fainthearted at the magnitude of the undertaking, as it constantly assumed larger proportions.”8 By early 1873, he had crossed his own Rubicon and never looked back. Once embarked on a course of action, he wasn’t a man to be hobbled by doubts.

In 1873, the mad dash for riches that followed the Civil War ended in a prolonged slump that ground on for six interminable years. On Black Thursday— September 18, 1873—the august banking house of Jay Cooke and Company failed because of problems in financing the Northern Pacific Railway. This event ignited a panic, leading to a stock-exchange shutdown, a string of bank failures, and widespread railroad bankruptcies. During the next few years, deflated by massive unemployment, daily wages plunged 25 percent, exposing many Americans to the horror of downward mobility. The six lean years accelerated the process of consolidation that had gathered force in many economic sectors.

This depression especially exacerbated the problems of the oil industry. Soon after Black Thursday, crude prices touched a shocking low of eighty cents a barrel; within a year, prices had tumbled to forty-eight cents—cheaper than the cost of hauling water in some towns. Just as Carnegie expanded his steel operations after the 1873 panic, so Rockefeller saw the slump as a chance to translate his master blueprint into reality. To capitalize on rival companies selling at distress-sale prices, he slashed Standard Oil’s dividend to increase its cash reserves. Standard Oil weathered the six-year depression magnificently, a fact Rockefeller attributed to its conservative financial policy and unparalleled access to bank credit and investor cash.

The oil-refining industry staggered under so much surplus capacity that even Standard Oil, comprising a quarter of the industry, operated only two of its six main Cleveland plants. For all that, it managed to post such creditable profits that it sometimes wooed competitors simply by giving them a privileged peek at its books. Rockefeller was acquiring unstoppable momentum and, having subdued Cleveland, he soon began his march from city to city in an unrelenting campaign of national consolidation.

As his operations grew, Rockefeller made a fetish of secrecy, flavored with paranoia, a legacy of his self-conscious boyhood. One day, he saw an office employee talking to a stranger and later inquired after the man’s identity. Although the subordinate said the man was a friend, Rockefeller lectured him, “Well, be very careful what you say. What does he want here? Don’t let him find out anything.” “But he is just a friend,” the employee replied. “He doesn’t want to know anything. He has just come to see me.” “Quite so,” said Rockefeller, “but you can never tell. Be careful, be very careful.”9

In absorbing competitors, Rockefeller was equally secretive and asked them to continue operating under their original names and not divulge their Standard Oil ownership. They were instructed to retain their original stationery, keep secret accounts, and not allude on paper to their Cleveland connection; internal correspondence with Standard Oil was often conducted in code or with fictitious names. Rockefeller also did this as a necessary legal expedient, for under existing law Standard Oil of Ohio couldn’t own property outside the state, a situation that invited deception by companies that operated nationally.

Rockefeller warned refiners joining Standard Oil not to parade their sudden wealth, lest people wonder where they got the cash. After striking a deal with one Cleveland refiner, he invited him to his Euclid Avenue home one night and said: “But you must keep this contract secret even from your wife. When you begin to make more money, don’t let anybody know it. Don’t put on any more style. You have no ambition to drive fast horses, have you?”10 With such thoroughgoing stealth, Standard Oil executives worried that if some newly acquired refiner died, his heirs might mistakenly claim ownership of the refinery.

Rockefeller was similarly suspicious of any boasting or ostentation among associates. One day, he was riding on a train in Cleveland with Pittsburgh refiner O. T. Waring when Waring asked him who owned a handsome, dark green hillside house in the distance. “You wish to know who owns that house?” asked Rockefeller, suddenly very upset. “It’s our Mr. Hopper, who makes barrels for us. Whew! It’s an expensive house, isn’t it? I wonder if Hopper isn’t making altogether too much money? Let’s look into it.”11 Back in the office, he pored over the accounts, decided that Hopper’s profits were excessive, and terminated the contracts with him. In a similar vein, Rockefeller was concerned that if he advertised his own wealth through fancy houses, he might attract investors into the refining business and only worsen the excess capacity problem.

As will be seen, Rockefeller was capable of extraordinary ferocity in compelling submission from competitors. He might starve out obdurate firms by buying all available barrels on the market or monopolize local tank cars to paralyze their operations. Yet Rockefeller didn’t apply this pressure lightly and preferred patience and reason—if possible—to terror. He was not only purchasing refineries but assembling a managerial team. The creation of Standard Oil was often less a matter of stamping out competitors than of seducing them into cooperation. In general, Rockefeller was so eager to retain original management that he accumulated expensive deadwood on the payroll and, for the sake of intraempire harmony, preferred to be conciliatory. Several years later, one colleague wrote to him that almost the entire executive committee “have made up their minds that the policy of buying out our competitors has had its day and that to pay men salaries for doing nothing is poor business, though these men have been all their active business lives in the Oil business.”12 This policy, which kept colleagues from defecting and forming competing companies, was one of many expensive extravagances that accompanied the creation of the monopoly.

With access to Oil Creek via the Allegheny River, Pittsburgh was an optimal crossroads for oil traffic, and it was inevitably targeted by Rockefeller for his second great wave of consolidation. After the failed Pittsburgh Plan, Rockefeller hoped to prod, wheedle, and cajole both Pittsburgh and Philadelphia refiners into Standard Oil.

During the autumn of 1874, Rockefeller and Flagler attended a secret summit meeting in Saratoga Springs with their Pittsburgh and Philadelphia counterparts, Charles Lockhart and William G. Warden. By snapping up the strongest refiners in these two towns, Standard Oil hoped that it would then easily corral the smaller refiners in their wake. With its racetrack and gambling casino, Saratoga Springs was a fashionable resort for wealthy sportsmen and, as Commodore Vanderbilt’s summer home, a popular gathering spot for confidential business talks. After breakfast, the four refiners retreated to a pleasant pavilion by a spring, where they talked for six hours. Only by banding together in one firm, Rockefeller argued in his most soothing manner, could they avert destructive price-cutting. When Lockhart and Warden hesitated, Rockefeller played his trump card: He invited Warden to come to Cleveland and inspect the Standard Oil books. When Warden later examined them, he was taken aback: Rockefeller could manufacture kerosene so inexpensively that he could sell below Warden’s production costs and earn a profit. After several weeks of appraising Standard Oil and being assured of a voice in its management, Warden and Lockhart joined forces with Rockefeller. In the clandestine sale of their plants, they had the foresight to take payment in Standard Oil stock. Since Rockefeller’s papers from this period are sparse, we don’t know precisely why these powerful rivals yielded to him, but they were probably attracted by the access to railroad rebates, lower interest rates, scarce tank cars, and technical expertise that went along with the partnership.

With this decisive stroke, Rockefeller absorbed more than half of the Pittsburgh refining capacity, with the leading Philadelphia refinery tossed in for good measure. In this way, he activated a self-sustaining movement as his new allies agreed to consolidate business in their localities and supervise the purchase of the remaining independent refineries. A massive chain reaction was thus set in motion that rippled through both refining centers, with local businessmen now acting as Rockefeller’s agents. Of twenty-two Pittsburgh refiners in existence when Rockefeller struck his Saratoga Springs deal, only one was still in existence independently two years later.

Rockefeller was especially delighted to snare Charles Lockhart, a bearded Scot with a frosty, taciturn manner who was, in Rockefeller’s words, “one of the most experienced, self-contained, and self-controlled men in business.” 13 During the Saratoga meeting, he impressed the Standard men because he listened attentively but hardly breathed a syllable, which elicited Rockefeller’s highest praise: “That’s the kind of man I’d like to have go fishing with me.”14 Though the oil business was comparatively young, Lockhart was already a veteran, having sold Seneca Oil along with William Frew in a Pittsburgh store in the 1850s. Soon after Edwin Drake’s discovery, Lockhart had carried the first samples of Pennsylvania kerosene to London. Besides creating the top Pittsburgh refiner, Lockhart, Frew and Company, the two men had also joined forces with William Warden to establish a Philadelphia affiliate, Warden, Frew and Company, which later evolved into the Atlantic Refining Company. This innovative trio of refiners shipped oil to Liverpool aboard steamers lined with iron tanks, reducing both the risk of fire and the noisome smells. The antithesis of the penurious Lockhart, Warden was an effusive, bighearted man with a broad face and muttonchop whiskers. With wider-ranging interests than the average Standard Oil man, he was a former abolitionist who had donated money to black causes after the war, a conscientious Presbyterian, and an active reformer in Philadelphia politics.

While stepping up his Pittsburgh and Philadelphia campaigns, Rockefeller also established a critical foothold in New York, where he had already bought the Devoe Manufacturing Company, specialists in case oil, and the Long Island Company, operator of a large refinery. Through the efforts of brother William, Rockefeller now took over Charles Pratt and Company. A short man with a sandy beard, Charles Pratt was a self-made Baptist with the habitual reticence that Rockefeller prized. He had manufactured paints before the Civil War and this had led him into oil refining. With a flair for merchandising, he had made his high-quality kerosene, Astral Oil, a common fixture in American households and so adroitly managed exports to Europe and Asia that the brand acquired international fame.

In time, Charles Pratt felt slighted and pushed aside by Rockefeller, who sometimes admired his conservative style but generally mocked him as an old fogy lacking in vision. Quite unlike Warden and Lockhart, Pratt ended up on the losing side of many policy disputes with Rockefeller and took to writing him querulous letters laced with self-pity. During one squabble with Rockefeller in 1881, Pratt wrote petulantly, “I cannot see good in any effort of mine to influence you or others by any arguments.” 15

The undisclosed purchase of Charles Pratt’s firm brought into the Standard fold one of the most energetic, swaggering figures in its history: Henry H. Rogers, who had led the committee of New York refiners that indignantly contested the SIC. He was now one of the first turncoats who defected to the Standard camp, and Rockefeller gloated over such conquests. “I’m happy to state that in most cases the very men who were desperately opposed to anything the Standard Oil Company might suggest . . . when they met us face to face, when they came to know from us rather than from those maligners, they readily joined us and never had occasion to regret.”16 Though he later clashed with Rockefeller, Rogers was a versatile executive who directed, in turn, Standard’s crude-oil purchases, pipelines, and manufacturing operations. As petroleum by-products grew in importance, Rogers, with a technical grasp that exceeded Rockefeller’s, patented a landmark process for separating naphtha from crude oil.

No sooner had Standard Oil enlisted Charles Pratt than New York independents began to experience unaccountable shortages of vital supplies. John Ellis and Company, which manufactured petroleum jelly, suddenly found it couldn’t book the requisite railroad cars for crude-oil shipments. Some invisible force was working against them. As the firm tried to unravel this mystery, a Standard Oil representative took the opportunity to drop by for a friendly chat with John Ellis and warned him, “You are helpless. You will have to sell out.” Appalled by this heavy-handed treatment, Ellis retorted, “I will never sell out to any company as crooked as the Standard Oil.”17 Ellis stayed independent, but few firms had the resources or fortitude to withstand the unceasing pressure exerted by the growing legions of Standard Oil minions.

In his lightning offensives in Pittsburgh, Philadelphia, and New York, Rockefeller was buying refineries in strategic railroad and shipping hubs, where he could negotiate excellent transportation rates. But despite its proximity to the wells, he never considered Oil Creek an economical place for refineries—which didn’t enhance his popularity in western Pennsylvania. Many ingredients used in refining—from sulfuric acid to glue to barrel hoops—cost more in that secluded area than in urban centers. By demoting the Oil Regions as a refining center, Rockefeller threatened the livelihood of thousands of people in Titusville, Franklin, and Oil City and offended their sense of justice. The locals were taught to believe, in Rockefeller’s words, that “the place where the oil was produced, gave certain rights and privileges that persons seeking to engage in other localities had no right to presume to share.”18 Rockefeller struck them as an evil interloper, a usurper of their birthright, when he was merely exercising his right to practice business where he pleased.

Nonetheless, to enforce an airtight monopoly, he needed to capture the Oil Creek refineries, if only to dismantle the least efficient ones. On January 22, 1874, he stunned local refiners by buying the Imperial Refining Company and its vast facility near Oil City. For local anti-Standard firebrands, it was a move laden with ominous symbolism. One of the consenting sellers was Captain Jacob J. Vandergrift, a husky little man with a Santa Claus beard. A former skipper on the Ohio River, Vandergrift was a wealthy, God-fearing temperance advocate who commanded universal power and respect. Along Oil Creek, his desertion to Standard Oil was considered treasonous betrayal, and it demoralized local independents—precisely what Rockefeller had wanted. In early 1875, Rockefeller captured the second largest Titusville refiner, Porter, More-land and Company, which brought twenty-seven-year-old John D. Archbold— the diminutive homilist who had electrified the crowd at the Titusville Opera House with his blazing oratory against the SIC—into the Standard Oil fold. Now, convinced that competition was a dated concept, Archbold suddenly enlisted under the banner of industrial consolidation.

Aside from Henry Flagler, Archbold was the most significant figure recruited by Rockefeller. Even before he set eyes on him, Rockefeller was intrigued. Registering at a Titusville hotel one day, he noted the signature above his own name: “John D. Archbold, $4 a barrel.” This cocky self-promotion impressed Rockefeller, for crude oil was selling at substantially below that price.19 Nine years younger than Rockefeller, the boyish Archbold was a short spark plug of a man, weighing about 130 pounds. The son of a Baptist circuit preacher who abandoned his family when John was ten (the prevalence of ministers’ sons at Standard Oil is striking), he had come to Titusville as a teenager and grown up with the industry. Quick-witted and optimistic, a jovial raconteur, he “laughed his way to a great fortune,” as one contemporary said.20 Though not easily charmed, Rockefeller was enchanted by Archbold’s high spirits, his inexhaustible fountain of jokes and stories; his short stature aside, he was the man at Standard Oil who most resembled Big Bill. Archbold became Rockefeller’s proxy, picked successor, surrogate son, and court jester. Before long, Rockefeller learned that this preacher’s son was overly fond of worldly pleasure and spent his nights drinking and playing poker. In time, Rockefeller forced him to repudiate alcohol, but even this only seemed to draw them closer together.

When Archbold went over to Standard Oil, he was denounced bitterly as a “renegade” and “deserter” and incurred special resentment from former admirers.21 He was such a deft, good-natured diplomat, however, that Rockefeller assigned him to absorb the Oil Creek refiners. In no other place did Rockefeller so sorely need an attractive substitute. Around Titusville, Standard Oil was reviled as the “octopus,” and Rockefeller was regarded as a monster. Mothers scolded their children by saying, “Run, children, or Rockefeller’ll get you!”22 As a result, the original Standard Oil officials never conducted buyout talks directly but operated through “acquaintances, competitors, and friends of the competitive refiners, best calculated to explain to them the situation, best fitted to succeed in the negotiations because of their intimate acquaintance, kindly relations and the mutual confidence of neighbors and friends.”23 Archbold was the smiling face who mollified enemies and restored peace, and with his advent Rockefeller no longer needed to go to Oil Creek.

In September 1875, Standard Oil formed the Acme Oil Company, a front organization to take over local refiners under Archbold’s guidance. Within months, he had bought or leased twenty-seven refineries, moving at such a hectic pace that he nearly drove himself to collapse. Over the next three or four years, Archbold herded the remaining independents into Standard Oil. Several letters from Archbold to Rockefeller confirm the latter’s contention that he paid fairly for refiners. After grudgingly paying an exorbitant $12,000 for one refinery, Archbold told Rockefeller, “We have the feeling that it is a large price for the property and do not doubt but that if we could hold out for a time on the present low basis we might do better, but whether the difference is worth the ammunition is a question.”24 Once the purchase was settled, he added, “I found it a very difficult trade to make, & was compelled to make some concessions to the parties that I disliked very much to make regarding which I will explain to you more fully when I see you.”25 Though independent refiners often felt squeezed by Rockefeller, he didn’t always exploit their vulnerability to the maximum possible extent and sometimes even showed leniency.

At least one prominent refiner contended that he was subjected to coercion by Standard Oil when he tried to build a new refinery. Samuel Van Syckel, the pipeline pioneer, said a Standard Oil representative had offered him a good salary to abandon the project. “He then said that I could make no money if I did refine oil. He also said if I did I could not ship it. He said he would say to me confidentially that they had made such arrangements with the railroads in reference to freight—in reference to getting cars—he knew I could make no money if I did make oil.”26 Van Syckel bowed to superior force.

In May 1875, Rockefeller completed his grand design of controlling all the major refining centers when he covertly bought J. N. Camden and Company of Parkersburg, West Virginia, and rechristened it the Camden Consolidated Oil Company. Camden’s correspondence documents the stealth involved in this sort of takeover. Before consummating the sale, Standard Oil requested a minute inventory of his properties and was ready to send its expert superintendent, Ambrose McGregor, to investigate. Yet Johnson Newlon Camden himself, a well-known Democratic politician, feared that the superintendent of his barrel factory might recognize McGregor and warned Standard Oil, “We would prefer having him to come here, but don’t see how he could do it without exposing the whole thing. I find the Superintendent of the Barrel Factory is a little curious about what is going on.”27 That even a superintendent was kept in the dark about the new owners underscores the priority that Standard Oil placed on confidentiality.

The Camden deal remedied a flagrant weakness for Rockefeller, who dominated refineries in the areas served by the New York Central, the Erie, and the Pennsylvania Railroads. There was only one gaping hole left in the map: the territory controlled by the maverick Baltimore and Ohio (B&O) Railroad, whose tracks spanned southern Pennsylvania, connecting a cluster of refineries in Parkersburg and Wheeling, West Virginia, with an oil-export center in Baltimore. Even more intolerable for Rockefeller, the upstart B&O dared to handle crude oil shipped to Pittsburgh through a pipeline called the Columbia Conduit Company, which had defied Standard Oil at every turn. In short, the B&O was providing comfort to the last independent refiners still holding out in open rebellion against his imperial rule.

The president of the B&O, John W. Garrett, had long exhorted Camden to fight the Standard Goliath and offered him marked-down freight rates to do so. Now that he had—unbeknownst to Garrett—defected to Rockefeller, Camden wanted to retain the rates expressly designed to shore up Standard Oil opponents. On May 12, 1875, scarcely able to suppress his mischievous glee, Camden informed his new owners in Cleveland, “Mr. Garrett . . . is coming out to see us tomorrow. I suppose he will encourage us to keep up our oil business and fight the ‘combination’ ”—that is, Standard Oil.28 And he negotiated excellent rates with Garrett. In exchange for shipping fifty thousand barrels of oil monthly, he would receive a ten-cent-a-barrel drawback on all refined oil sent via the B&O—whether shipped by Camden or by his competitors. That Garrett revived the infamous drawback when he thought he was fighting Standard Oil shows that nobody could claim exclusive virtue in this business.

That spring, Rockefeller gave Camden wide leeway to buy up refiners serviced by the B&O, and he quickly snatched up three Parkersburg refiners. At several points, Camden, like Archbold, bristled at the excessive prices he paid. “It almost makes me weepy to pay out good money for this kind of junk,” he told Rockefeller, “but as it is a part of our duty to mankind, I suppose it is necessary to carry it through without flinching.”29 The completion of the Baltimore campaign left John D. Rockefeller, still in his thirties, the sole master of American oil refining. Since no major crude-oil deposits had been unearthed beyond western Pennsylvania—Russia, perhaps, being the lone exception—it also meant that he monopolized the world kerosene market. He was now living a fantasy of extravagant wealth that would have dwarfed the most febrile daydreams of William Avery Rockefeller. And few people beyond the oil business had ever even heard of him.

The swift raids on the principal refining centers cost such a king’s ransom that Rockefeller’s most ticklish problem was how to bankroll this marathon buying spree. To entice refiners, he offered them the option of taking payment either in cash or stock, and he always dreaded the choice of cash. “I would whip out our check book with rather a lordly air and remark, as if it were a matter of entire indifference to us, ‘Will I write a check or would you prefer payment in Standard Oil shares?’ ”30 If they chose cash, he often had to scramble among banks to scrounge up money. By encouraging opponents to take stock, he conserved funds and also enlisted the allegiance of quondam foes in his burgeoning enterprise. But few companies followed the lead of Clark, Payne and invested in Standard Oil instead of taking payment.

It mortified Rockefeller that so few trusting souls took Standard Oil stock. Mostly, they doubted that Rockefeller and his Young Turks could realize their experimental plan. As he recalled, “So when I offered them either spot cash outright for their property or stock in the new company, they took my money and laughed in their sleeves at my folly.” 31 Rockefeller knew, with his customary certitude, that the people who took shares would be enriched. Indeed, American high society in the twentieth century would be loaded with descendants of those refiners who opted for stock. At every opportunity, Rockefeller sounded a prophetic note about the future appreciation of these shares. One Cleveland refiner who took stock later ran into Rockefeller, who asked, “Do you still hold your stock?” When told that was the case, Rockefeller entreated him, “Sell everything you’ve got even to the shirt on your back, but hold on to the stock.” 32 Not all of them did, and Rockefeller always fancied that much of the venom turned against him came from disgruntled refiners who regretted having declined the stock.

Despite his stupendous borrowing needs, Rockefeller no longer needed to truckle to bankers and defied the most fearsome of them all: Amasa Stone. Cold, stern, and unapproachable, Stone amassed a fortune building bridges and railroads and became managing director of the Lake Shore Railroad at the personal behest of Commodore Vanderbilt. Twenty years older than Rockefeller, he expected the refiner to defer to him, and this irked the younger man. To ensure a steady flow of credit, Rockefeller put Stone on Standard’s board, but when the latter grew arbitrary and domineering, Rockefeller plotted to banish him. He soon had his chance when Stone inadvertently let an option expire for buying more Standard Oil stock. Several weeks later, recognizing his error, Stone showed up at the Standard office and induced Flagler to extend the expiration date. Itching for a showdown, Rockefeller overrode Flagler and refused to sell Stone any more shares, prompting the irate banker to liquidate his stake in the company. Rockefeller now considered himself the equal of any Cleveland businessman and wouldn’t grovel to anyone.

Just as he dreamed of emancipation from his bankers, Rockefeller hoped to escape the clutches of Vanderbilt, Gould, Scott, and other railroad barons. Early on, he had demonstrated the edge possessed by large-scale shippers in haggling with railroads. Now, he went a critical step further, figuring out how to insinuate himself into the very infrastructure of the industry.

Still uneasy at the specter of the oil fields drying up, the railroads shrank from investments in custom-made facilities for handling oil, worried that this specialized equipment might someday be rendered worthless. Exploiting this fear, Rockefeller worked out a clever bargain with the Erie Railroad in April 1874. The railroad would transfer control of its Weehawken, New Jersey, terminal to Standard Oil if Standard met two conditions: First, it would have to outfit the rail yards with modern apparatuses that would help to expedite oil shipments to New England and the South; second, it would have to ship 50 percent of its western refinery output over Erie tracks. For Rockefeller, the arrangement promised multiple advantages, for he not only received preferential rates from Erie but could also chart the oil movements of competitors across the country. He could even block the export of rivals’ oil—an option that, having made this huge investment, he freely exercised. As he argued, “I know of no parallel case in other branches of business where the competitor felt injured because he could not use his rival’s capital and facilities for his own advantage and the disadvantage of the owner of the capital and facilities.”33 Rockefeller’s logic was unimpeachable—unless one accepted the still controversial proposition that railroads were common carriers and should deal with all shippers impartially.

Rockefeller was embraced no less warmly by the New York Central, which was controlled by the Vanderbilt family. Commodore Vanderbilt reportedly said that Rockefeller was the one man in America who could dictate terms to him; meanwhile, his son, William H. Vanderbilt, discreetly purchased Standard Oil stock for his own account.34 It was the younger Vanderbilt who said presciently of Rockefeller in the 1870s: “He will become the richest man in the country,” thus inheriting the title from his father. 35Standard Oil eventually became so enmeshed in the railroad business that it controlled virtually all the oil traffic that traveled over the Erie and the New York Central tracks.

Standard Oil also profited immeasurably from the revolution in oil transport as barrels gave way to tank cars. As Rockefeller later testified, “We soon discovered as the business grew that the primary method of transporting oil in barrels could not last. The package often cost more than the contents, and the forests of the country were not sufficient to supply the necessary material for an extended length of time.”36 Once again, the railroads balked at investing in rolling stock that couldn’t also transport general freight, so Rockefeller stepped boldly into the breach. In 1874, Standard Oil—with that kindly solicitude for the railroads’ welfare that artfully tied them up with myriad strings—began to raise tens of thousands of dollars to build oil-tank cars, which they would then lease to the roads for a special mileage allowance. Decades later, Armour and Company, the Chicago butcher, mimicked the same strategy by buying up refrigerator cars.

As the owner of almost all the Erie and New York Central tank cars, Standard Oil’s position grew unassailable: At a moment’s notice, it could crush either railroad by threatening to withdraw its tank cars. It also prodded the railroads into granting favors for tank cars not enjoyed by the small refiners who shipped by barrel. For instance, railroads levied a charge for the return of empty barrels, while tank cars traveled free on the return route from the East Coast to the Midwest refineries. Tank-car clients also received the exact same leakage allowance received by barrel shippers, even though the tank cars didn’t leak—which effectively allowed Standard Oil to carry sixty-two gallons gratis in every tank car.

In this impregnable position, Rockefeller fulfilled a longtime wish and abolished forever the freight advantage of the Oil Creek refiners. In high-level talks with railway officials at Long Branch, New Jersey, and Saratoga Springs in the summer of 1874, he made them equalize rates for all refiners shipping to the East Coast. Crude oil would now effectively travel free on the 150-mile stretch between Oil Creek and Cleveland, destroying the advantage of owning a refinery in the oil fields and creating parity for Cleveland. When this shocking news surfaced in the so-called Rutter Circular of September 9, 1874, it sparked mass meetings and howls of protest along Oil Creek, where Rockefeller was universally execrated. Unlike the situation with the SIC, the railroads didn’t tremble at the uproar but reacted with cool intransigence, knowing the independent refiners were now doomed. Three weeks passed before A. J. Cassatt of the Pennsylvania Railroad issued a curt, unrepentant letter in defense of the new uniform rates. For a long time, the independents had fought a valiantly unequal contest with Standard Oil, but now that the railroads had fallen under Standard’s spell, the contest was over.

Had oil been found in scattered places after the Civil War, it’s unlikely that even Standard Oil could have mustered the resources to control it so thoroughly. It was the confinement of oil to a desolate corner of northwest Pennsylvania that made it susceptible to monopoly control, especially with the emergence of pipelines. Pipelines unified the Pennsylvania wells into a single network and ultimately permitted Standard Oil to start or stop the flow of oil with the turn of a spigot. In time, they relegated collaboration with the railroads into something of a sideshow for Rockefeller.

Only belatedly did Rockefeller discern the full potential of pipelines, and his entry into the business seemed somewhat of a defensive, rearguard action. He knew that the railroads felt threatened by the pipelines, and for a time he thought it worthwhile to help them safeguard their interests by delaying the introduction of this new technology. Then, one of the railroads forced him to modify his plans. During the summer of 1873, he was taken aback when the Pennsylvania Railroad expanded into pipelines through an aggressive, fast-freight subsidiary known as the Empire Transportation Company, which integrated two of the largest Oil Creek pipelines into its railroad network. Thus far, pipelines had only pumped oil short distances from the wellhead to the railroads, but this move presaged a time when pipelines would span great distances and supplant railroads altogether. Even worse from Rockefeller’s viewpoint, Empire seemed the harbinger of a pipeline monopoly under the thumb of his rival and sometime coconspirator Tom Scott of the Pennsylvania Railroad. Rockefeller’s paranoia was fully justified. In the perpetual game of shifting alliances, Tom Scott had made his tactical compromises with Rockefeller, but he generally feared Standard Oil and sought to shatter its refining monopoly, presumably to replace it with his own.

In a deft countermove, Rockefeller called upon Daniel O’Day, one of the most colorful figures in Standard history, to lay down a pipeline system. Born in County Clare, O’Day was a profane, two-fisted Irishman who tempered ruthless tactics with wit and charm. He inspired loyalty among subordinates and raw terror among adversaries. On his forehead O’Day bore a scar from an old Oil Creek brawl that was a constant reminder of his bare-knuckled approach to business. In 1874, under O’Day’s tutelage, Standard launched the American Transfer Company to construct a pipeline network. Jockeying for position, Rockefeller also acquired a one-third interest in Vandergrift and Forman, controlled by Jacob J. Vandergrift, the steamboat captain who had merged his refining interests with Standard Oil. The Vandergrift pipelines formed the core of a new venture, the United Pipe Lines, that pretended to be free of Standard Oil control. By giving small stakes in United to William H. Vanderbilt of the New York Central and Amasa Stone of the Lake Shore, Rockefeller tightened his grip over friendly railroads. This set him up to extract maximum advantage from both the railroads and pipelines so long as these two means of transport coexisted in the oil business. When the owners of the first pipeline systems established a pool to set rates and allocate quotas among putatively competing networks in the summer of 1874, Rockefeller’s pipelines gained an impressive 36 percent market share.

Between American Transfer and United Pipe Lines, Rockefeller now sat astride nearly a third of the crude oil flowing from Oil Creek wells. Henceforth, Standard’s influence in petroleum transport would be no less pervasive and even more profitable than its unmatched position in refining. This power offered many temptations for abuse. An oilman could make a tremendous strike and suddenly feel fabulously rich, but if he couldn’t hook up the gushing black liquid to a pipeline, it was worthless. The drillers had always credited Rockefeller with a life-and-death hold over them, and as the Standard Oil pipelines encroached upon the oil fields, snaking across the slopes of Oil Creek, that power took on a frighteningly tangible form.

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