The Rockefeller Monopoly

John D. Rockefeller's father, called "Doctor" Rockfeller, was a bogus physician who sold patent medicines and had once been indicted for rape. John D.'s mother, a devout Baptist, would tie him to a fence post and beat him when he disobeyed her. Beginning in Cleveland, Ohio as a bookkeeper, he then went into partnership in a refinery with the Clark brothers and soon bought them out.

"He expanded with great daring. Borrowing wherever he could, and bringing in new partners. He realized that the only way to dominate the industry was not by producing oil, but by refining and distributing it, and undercutting his rivals by cheaper transport. With the help of a new partner, Henry Flagler, he persuaded the railroads to give secret rebates to his oil, extending the existing practice of allowing discounts for large quantities of freight."

Anthony Sampson. The Seven Sisters

When John D. secretly bought out rival oil companies, the executives pretended to be Rockefeller competitors and reported what other rival company executives told them. By 1870 he established a joint-stock company, called the Standard Oil Company, with a capital of a million dollars, of which he owned 27 percent. Standard Oil was already producing one tenth of the oil in America.

The oil industry has always been plagued with the problem of overproduction. The year after oil was discovered, for example, the price of a barrel was $20. At the end of the next year the price had dropped to 10 cents a barrel because of overproduction.

In the 1870s, two groups vied for control of the oil industry:
  • The producers and drillers
  • The refiners

    By 1875, Rockefeller, as president of the refiners' Central Association, had become the leader of the refiners. The refiners effectively took control from the producers and drillers. John D. formed the Standard Oil Trust in 1883, trading across the entire continent.

    "Through the device of a trust, which held shares in each component company, Rockefeller was able to circumvent the laws which then prohibited a company in one state from owning shares in another; at the same time, he could and did pretend that all the companies were independent. He had no personal doubts about the rightness and need for this kind of concentration: 'this movement,' he said later, in a famous passage, 'was the origin of the whole system of modern economic administration. It has revolutionized the way of doing business all over the world. The time was ripe for it. It had to come, although all we saw at the moment was to save ourselves from wasteful conditions . . .The day of combination is here to stay. Individualism has gone, never to return.'"
    Anthony Sampson. The Seven Sisters

    From the center of his web at 26 Broadway in New York City, Rockefeller bought oilfields as well as refineries as the industry moved from Pennsylvania to Ohio, to Kansas, and on to California. Standard Oil's income was larger than most states and it "bought" federal and state politicians to enhance its position. With its huge profits, Standard could finance its own expansion, remaining free from bankers, whom Rockefeller resented. Standard Oil was now exporting oil to the Middle East, the Far East, and Europe. By 1885, 70% of Standard's business was overseas. Standard now had its own network of agents throughout the world, its own intelligence service which provided information about its competitors and about political leaders in all the target market countries.

    The ruthlessness of Rockefeller's tactics against his competitors and his own workers (when they dared to demand a living wage), became the focus for a number of muckrakers such as Henry Demarist Lloyd and Ida Tarbell. Tarbell's History of Standard Oil aroused the public against the monopolistic excesses of Rockefeller. The Sherman Anti-Trust Act was passed in 1890. The Act was only brought to bear during Theodore Roosevelt's presidency. In 1907 a report was published by the Commissioner of Corporations and a special prosecutor, Frank Kellogg, began to detail the evidence of Standard's monopoly and exorbitant profits--nearly a billion dollars in a quarter-century. The case was appealed to the Supreme Court which in 1911 decreed that Standard Oil must divest itself of all it subsidiaries.

    The total value of the assets of all living descendants of John D. Rockefeller was estimated in 1974 at 2 billion dollars--something like 2 trillion dollars in today's money.

    The Standard Oil progeny included:
    • Standard Oil of New Jersey (EXXON)
    • Standard Oil Company of New York (MOBIL)
    • Standard Oil of California (SOCAL)
    • GULF Oil Company
    • Texas Company (TEXACO)
    The Rockefellers, under the leadership of David, have continued to control American politics through such organizations as the Council on Foreign Relations and the Trilateral Commission.