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Standarad Oil II - John D. Rockefeller: The First and Richest Oil Tycoon

In this second part of the Standard Oil story, we profile John D. Rockefeller, the man who founded the world’s first large oil company, which was forced by the US anti-trust law to dissolve into several independent companies exactly one hundred years ago.
This article appeared in Vol. 8, No. 3 - 2015

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John Davison Rockefeller in 1872 at age 33. (Photo Credit: Wikipedia) John Davison Rockefeller was born on 8 July 1839 on a farm in Richford, New York. His father, William Avery Rockefeller (1810-1906), “Big Bill,” was notorious for keeping mistresses and leaving his family to embark on extended trips for various businesses including selling herbal medicines. Nevertheless, he taught the young John how to be clever at both earning and spending money. Rockefeller’s mother, Eliza Davison (1813-1889) was a devout Christian and was largely responsible for holding the family together and raising her six children with a sense of discipline and diligence. Although his family moved a few times in the eastern USA, John attended good schools and was studious. While living in Strongsville, a suburb of Cleveland, Ohio, he decided to quit school and instead take a ten-week college course in business. At age 16, he got a job as a book keeper in order to support his family.

In 1859, the year Drake drilled his famous discovery well in Oil Creek, Pennsylvania, Rockefeller entered a wholesale foodstuff business with Maurice Clark, with a start-up capital of $4,000. During the American Civil War (1861-65), Rockefeller continued his prospering business and did not fight (possibly because as the eldest son he had to support his family) although he was sympathetic to the North’s anti-slavery ideals; Rockefeller instead donated money to the Union Army and paid for a substitute soldier to fight on his behalf.

John Davison Rockefeller at age 78 as portrayed in 1917 by John Singer Sargent. Despite his wealth, Rockefeller did not lead a lavish, entertaining lifestyle; he abstained from alcohol and tobacco, and was a regular church-goer. He was a meticulous accountant. “As I began my business life as a book keeper,” he once remarked, “I learned to have great respect for figures and facts, no matter how small they were.” Petroleum was increasingly replacing whale oil as the major lighting fuel and, as Pennsylvania’s Oil Region was booming, Rockefeller and Clark, together with Clark’s two brothers and a chemist Samuel Andrews (all Englishmen) started an oil refinery in 1863 in Cleveland. Two years later, Rockefeller bought the Clark brothers shares for $72,500. Rockefeller and Andrews named their refinery Standard Works, implying that their objective was a steady flow of quality oil to clients. Indeed, Rockefeller, as he later recalled, had plans to do oil business “on a larger scale.” They set up an office in Oil City, Pennsylvania. In 1866, Rockefeller’s younger brother William joined him and they built another refinery in Cleveland; a year later, however, this new refinery was absorbed by Rockefeller and Andrews, leading to a bitter relationship between the Rockefeller brothers for the rest of their lives. In 1867, Henry Flagler and Stephen Harkness entered partnership with Rockefeller and Andrews. This was the nucleus of Standard Oil of Ohio that was officially founded in 1870 in Cleveland. Flager, like Rockefeller, played a vital role in the company’s successes and described their fellowship in his famous motto: “A friendship founded on business is better than a business founded on friendship.”

The Standard Oil Trust 

Standard Oil of Ohio was principally a downstream company and did not want to get involved in risky oil exploration and drilling. Instead, the partners focused on an aggressive “horizontal integration” of other oil refineries under the umbrella of Standard. In its defense, Standard argued that mushrooming refineries (some of poor quality) in north-eastern US had led to chaotic business, unnecessary competition, and unreasonably cheap oil prices, and that Standard actually saved the oil industry during its infancy. Nonetheless, the company’s “standardising” of the oil industry involved practices that were later found to be unethical. Many refineries in the Oil Region (some of which were also oil producers) despised Standard, as they were forced out of business.

In those days, railroad companies were competing to carry oil barrels from or to refineries. Standard struck secret deals with the Lake Shore Railroad of New York and the Southern Improvement Company in Pennsylvania to the effect that Standard would ensure to ship at least a certain amount of oil on their trains daily but that the railroad company would give a special discount (“rebate”) per barrel to Standard but not to other refineries. Moreover, as the railroad company charged other refineries more per oil shipment, it should give a portion of the price difference (“drawback”) to Standard! These rebates and drawbacks made Standard’s oil cheaper than that of its competitors in the Oil Region, and in Cleveland and New York. 

Standard’s overall plan was to either buy out its competitors or force them out of business, and thus monopolize the oil market. To achieve its objectives, Standard spied on other companies’ transactions, artificially sold cheaper petroleum products in the competing territories, or simply asked other refineries join its enterprise (some of which gladly did).

During the 1870s and 1880s, Standard rose to be the predominant company, controlling nearly 90% of refineries, pipelines, transportation and marketing of oil in the USA. In 1882, it consolidated the power of its numerous subsidiaries and stockholders in the form of the Standard Oil Trust governed by nine trustees (including Rockefeller and other founding members). Out of the Trust’s 700,000 shares, Rockefeller owned 191,700. In 1885, the headquarters moved to New York City.

In response to protests against Standard’s practices and growing power, however, Senator John Sherman of Ohio initiated an anti-trust legislature in 1890 that demanded the dissolution of the Standard Oil Trust. Rockefeller was lucky, though: two years previously New Jersey had passed a law that permitted large corporations to operate in that state while also holding shares of other companies operating outside the state. Rockefeller and partners simply renamed their Trust Standard Oil Company of New Jersey and registered it there.

Rockefeller’s Legacy

Despite his fame, Rockefeller did not like publicity, and wrote only a brief autobiography, Random Reminiscences of Men and Events (in a response to Ida Tarbell’s book) which was first published as a series of articles in the monthly magazine The World’s Work during 1908-09 and in a book form in 1909 (reprinted in 1933 and later in an illustrated volume in 1984). His official biographies include Allan Nevins’ John D. Rockefeller: The Heroic Age of American Enterprise (1940) and Study in Power: John D. Rockefeller, Industrialist and Philanthropist (1953). Ron Chernow’s Titan: The Life of John D. Rockefeller, Sr. (1998) is a definitive, up-to-date biography to read. In 1897, Rockefeller retired from Standard, although continued to hold his majority shares and influence in the company for the rest of his life. He even expanded his business activities to other industries during his four decades of retirement.

Rockefeller was an avid donor to charities, even when he was a young boy, and is renowned as one of the world’s greatest philanthropists. He used his fortunes to establish the University of Chicago in 1890, Rockefeller University in New York City in 1901, and in 1913 the Rockefeller Foundation in New York, a major supporter of research and service in the areas of education, arts, science, health, and food internationally.

After Ida Tarbell published her expose in The History of the Standard Oil Company in 1904 (see GEO ExPro, Vol. 8, No 2), she wrote an article for the McClure’s magazine entitled “John D. Rockefeller: A Character Study,” in which, while admiring Rockefeller’s philanthropic activities, Tarbell described the man as simply “money-mad.”

Rockefeller married Laura Celestia Spelman (1839-1915) in 1864, at the age of 25. They had four daughters and one son (the youngest), John Davidson Rockefeller, Jr. (1874-1960), who took over the family’s businesses.

Rockefeller died on 23 May 1937 at age 97 in Ormond Beach, Florida and was buried in Cleveland, Ohio, the city he called home and where he had built a house for his parents and siblings, a house for his wife and children, the largest refinery of his day and the first headquarters of the Standard Oil Company. 

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