History of Oil - Part 2 of 5
Summary
TLDRJohn Rockefeller's relentless pursuit of control in the oil industry led to a pivotal auction where he outbid his partner by $500, securing the refinery that set his career in motion. As demand for kerosene surged post-Civil War, Rockefeller's profits ballooned. He sought stability in the volatile industry by acquiring assets and forming the Standard Oil Trust in 1882, which monopolized 90% of U.S. refinery operations. His empire, however, faced scrutiny as critics saw it as a threat to free enterprise, marking the beginning of the American Progressive Era's anti-monopoly sentiment.
Takeaways
- 🚀 John Rockefeller's partnership with Maurice Clark ended due to differing views on the oil industry, leading to a competitive bidding for the firm's assets.
- 💰 Rockefeller's strategic bid of $72,500 secured the assets, a mere $500 difference that significantly altered the course of history.
- 🔥 Post-Civil War, the demand for kerosene grew, and Rockefeller's profits soared, with sales reaching 2 million in 1866 alone.
- 🛢️ Rockefeller sought to stabilize the oil industry by gaining control over various aspects, including transportation and supply chains.
- 🌳 He secured resources like white oak timber for barrels and even bought ships and tanker cars to ensure a steady supply chain.
- 🤝 Henry Flagler joined Rockefeller in 1867, bringing an extroverted personality that complemented Rockefeller's introverted nature, forming an ideal team.
- 🛤️ Flagler's negotiation skills with the railroads gave Standard Oil a significant competitive advantage by controlling shipping rates.
- 🏛️ By 1872, Standard Oil had absorbed 21 refining firms in Cleveland, making Rockefeller one of the richest men in America.
- 💡 The comparison of Rockefeller's wealth to Bill Gates illustrates the massive wealth gap between the ultra-rich and the average American worker of the time.
- 📉 Rockefeller's monopoly over the oil industry, controlling 90% of refinery operations, raised concerns about the health of the free enterprise system.
- 🛡️ In response to criticism and legal challenges, Rockefeller created the Standard Oil Trust in 1882, a legal mechanism to consolidate and control his monopolistic business practices.
Q & A
Why did Rockefeller's partner Maurice Clark part ways with him?
-Maurice Clark did not share Rockefeller's enthusiasm for the oil industry, leading to a reluctant decision to part ways.
What was the significance of the bidding war between Rockefeller and Clark for the firm's assets?
-The bidding war was significant as it determined the future of their respective careers, with Rockefeller winning by a margin of $500, which ultimately altered the course of history.
How did Rockefeller's focus on oil contribute to his success after the Civil War?
-As America's economy industrialized and demand for kerosene grew in urban areas, Rockefeller's profits soared, with kerosene sales reaching 2 million in 1866 alone.
Why was Rockefeller concerned about the fluctuating prices in the oil industry?
-Rockefeller was concerned because the boom-bust nature of the industry could affect his business. He believed stabilizing the industry would be good for both America and his own interests.
What steps did Rockefeller take to gain control and stabilize the oil industry?
-Rockefeller bought his own ships for transporting kerosene, tanker cars for crude oil, and even white oak timber reserves for barrels, ensuring a stable supply chain and control over the industry.
Who was Henry Flagler and how did he become Rockefeller's business associate?
-Henry Flagler was a businessman who had been involved in selling produce and distilling whiskey. He joined Rockefeller in 1867 and became his closest business associate and friend, complementing Rockefeller's introverted personality with his extroverted nature.
What role did Flagler play in Standard Oil's negotiations with the railroads?
-As secretary of Standard Oil, Flagler was assigned to negotiate shipping rates with the railroads. He used the company's dominance in the oil industry to dictate prices and secure rebates, giving Standard Oil a significant competitive advantage.
How did Standard Oil's relationship with the railroads impact its competitors?
-Standard Oil's leverage over the railroads forced competitors to sell out to Standard Oil or face bankruptcy, as they could not compete with the lower transportation costs and controlled market.
By what year did Standard Oil control 90 percent of all refinery operations in the United States?
-By 1879, Standard Oil had gained control over an incredible 90 percent of all refinery operations in the country.
What was the public and legal response to Standard Oil's monopoly?
-Criticism of Rockefeller and Standard Oil reached unprecedented levels, with concerns that the free enterprise system was in danger. Legal challenges arose, claiming that the company had no right to own refineries or warehouses in other states under the laws of the time.
What was the Standard Oil Trust and why was it created?
-The Standard Oil Trust was a legal business organization created by Rockefeller in 1882 to consolidate his oil companies under one entity, allowing him to operate as a monopoly and protect his business from legal challenges and public criticism.
Outlines
🛢️ John Rockefeller's Oil Empire Takes Shape
This paragraph outlines the early days of John D. Rockefeller's involvement in the oil industry, his strategic separation from his partner Maurice Clark, and the subsequent acquisition of the firm's assets. Rockefeller's determination and calm demeanor during the bidding process led to his control of the company, which he then focused on exclusively. As the American economy industrialized post-Civil War, the demand for kerosene grew, and Rockefeller's profits skyrocketed. Despite his success, he sought to expand and stabilize the oil industry, leading to the purchase of ships, tanker cars, and forest reserves to secure supply chains. The paragraph also introduces Henry Flagler, Rockefeller's business associate and friend, who played a crucial role in negotiating favorable shipping rates with railroads, giving Standard Oil a significant competitive advantage.
📈 The Monopolistic Ascent of Standard Oil
The second paragraph details the aggressive expansion tactics of Standard Oil, led by Rockefeller and Flagler, which resulted in the company controlling an astonishing 90 percent of all refinery operations in the United States by 1879. The narrative describes how competitors were forced to sell out to Standard Oil or face bankruptcy, highlighting the immense pressure and the monopolistic practices of the company. Rockefeller's personal wealth grew exponentially, drawing comparisons to modern-day billionaires like Bill Gates. The vast wealth disparity between Rockefeller and the average American worker of the time is emphasized, illustrating the perception of the 'robber barons' as living in a different world. However, the unchecked power of Standard Oil raised concerns about the threat to the free enterprise system, leading to widespread criticism and the eventual organization of the Standard Oil Trust as a legal mechanism to maintain monopoly control.
Mindmap
Keywords
💡Oil Industry
💡Partnership
💡Kerosene
💡Standard Oil
💡Monopoly
💡Economic Uncertainty
💡Henry Flagler
💡Railroads
💡Trust
💡Industrialization
💡Competitive Advantage
Highlights
Rockefeller's partner Maurice Clark did not share his enthusiasm for the oil industry, leading to a partnership split.
Rockefeller and Clark bid against each other for the firm's assets, with Rockefeller winning by a $500 difference.
Rockefeller's resolve and calm demeanor during the bidding process determined his career direction.
Post-Civil War America saw a surge in demand for kerosene, boosting Rockefeller's profits significantly.
Despite success, Rockefeller sought to expand operations but was constrained by supplier control.
Rockefeller aimed to stabilize the fluctuating oil industry for the benefit of America and his own interests.
He acquired ships, tanker cars, and forest reserves to secure supply chains for Standard Oil.
Henry Flagler joined Rockefeller in 1867, complementing Rockefeller's introverted personality with his extroverted one.
Rockefeller and Flagler formed an ideal team, determined to protect the oil industry from economic uncertainty.
Flagler's negotiation skills with railroads gave Standard Oil a competitive advantage in the petroleum market.
Standard Oil's dominance forced competitors to sell out or face bankruptcy.
By April 1872, Standard Oil had absorbed 21 other refining firms in the Cleveland area.
Rockefeller's personal wealth reached several million dollars, making him one of the richest men in America.
The comparison of Rockefeller's wealth to Bill Gates illustrates the vast gap between the rich and the average worker.
Standard Oil controlled an incredible 90 percent of all refinery operations in the United States by 1879.
Rockefeller's monopoly raised concerns about the free enterprise system and the lack of competition.
Criticism of Rockefeller intensified, with claims that Standard Oil was legally chartered only in Ohio.
In response to criticism, Rockefeller organized the Standard Oil Trust in 1882, a legal form for creating monopolies.
Transcripts
rockefeller's partner maurice clark did
not
share his enthusiasm for the oil
industry
the partners reluctantly decided to part
ways
the two agreed to bid against each other
for the firm's assets
including the refinery the stakes were
high for both men
but rockefeller's resolve was unwavering
that was the day that determined my
career
i felt the bigness of it but i was as
calm as i am talking to you now
john rockefeller
in the end clark bid 72 thousand dollars
rockefeller bid 72-5
it was a 500 difference it altered the
course of history
immediately upon taking control of the
company
rockefeller focused his energies
exclusively on
oil as the civil war ended and
america's economy became more and more
industrialized
demand for kerosene grew in the nation's
rapidly expanding urban areas
rockefeller's profits soared
in 1866 alone sales of rockefeller
kerosene
reached 2 million
despite his success rockefeller was not
content
but his drive to expand his operations
was at the mercy of his suppliers
over which he had virtually no control
john d rockefeller was concerned about
the fluctuating prices in the oil
industry
it was a boom bust industry and he
thought that if he could stabilize the
industry
this would not only be good for america
but it would be good for john d
rockefeller
the rockefeller stabilized meant control
and the best way to get control was to
buy it
he bought his own ships to transport
rockefeller kerosene from cleveland to
the midwest
tanker cars to transport crude oil to
the company's refineries and warehouses
in new york
he even purchased forest reserves of
white oak timber
to ensure the company had an adequate
supply of barrels
but there was one more thing left to
conquer
and for help rockefeller turned to a man
who was to become
his closest business associate and
friend
henry flagler flagler joined rockefeller
in 1867 he had a kind of an interesting
background as well
he had been selling produce and
mostly distilling whiskey and he made
quite a bit of money but unfortunately
he also
lost all of the money one of these
gentlemen
up and down several times until he
joined rockefeller in 1867
he was sort of the perfect counterpart
to rockefeller he was energetic
and and outgoing uh sort of an extrovert
to offset rockefeller's
very introverted kind of personality and
the two of them made an ideal team
together rockefeller and flagler were
determined to protect the oil industry
and themselves from the chaos of
economic uncertainty
but to do so they would have to wrestle
control
away from the most powerful industrial
force in america
in 1870s america the railroads were all
powerful
the growth of american industry was
dependent on the rapid transportation of
goods and supplies rockefeller's
standard oil was no exception
but while other industries cowered
before the powerful railroad companies
henry flagler called their bluff
as secretary of standard oil flagler was
assigned to negotiate shipping rates
with the railroads
he went after his task with a
ruthlessness and aggressiveness the
likes of which the railroads had never
seen
flagler was in an excellent position to
negotiate
since standard oil had a stranglehold on
the oil industry
by 1871 standard oil transported by
rail over a million barrels of crude oil
and kerosene
the threat of losing standard shipping
business was more than the railroads
wanted to risk
flagler could dictate the price if he
wanted a rebate from the railroad so
that he would have a competitive
advantage
all he had to do was tell them that he
was not going to pay their price
he was going to pay only something less
if they didn't like that they could go
to some other refiner
the problem was there weren't any other
refiners
their relationship with the railroads
gave standard oil
an incredible competitive advantage in
the petroleum market
rockefeller's competitors were faced
with a stark choice
sell out to standard oil or go bankrupt
there was a pressure brought upon my
mind and upon almost all citizens of
cleveland engaged in the oil business
that we were virtually killed as
refiners
if we did not sell out we should be
crushed john alexander president
scofield incumbent
to rockefeller it didn't matter how his
competitors or even the public viewed
standards business practices
when one rival complained to the oil
tycoon that he did not wish to sell
rockefeller replied bluntly you can
compete with standard
we have all the large refineries now if
you refuse to sell
it will end in your being crushed
by april 1872 standard oil had acquired
or absorbed 21 other refining firms in
the cleveland area alone
rockefeller himself only a decade after
entering the oil business
was one of the richest men in the
country with a personal wealth of
several million dollars
he was now both admired and feared by
businessmen
throughout america it's interesting to
try to figure out how much money he made
and how much he
accumulated i think the answer is that
at the time
not even rockefeller knew because the
money was literally coming in
faster than he could count it i think
comparing a rockefeller to a bill gates
is probably a good example
because gates personal wealth now is
in excess of 10 or 15 billion dollars
and that's so
far beyond what an average american
worker makes today
i think very much an average american
worker of the 1890s or the turn of the
century
probably would have seen rockefeller on
the same terms because his wealth
was certainly in the hundreds of
millions perhaps even
approaching a billion dollars so way way
ahead
an average american production worker
factory worker
at the turn of the century might be
making
depending on his skill level or her
skill level might be making
five ten twelve dollars a week so
five or six hundred dollars a year was
considered a
decent living for an average
industrial worker in america comparing
that with a with a fortune worth
hundreds of millions
so the gap is similar and and i think
americans saw these so-called robber
barons
as people in effect living in a whole
another world i mean their their whole
standard of living was just
it couldn't even be compared in some
ways the gap was so great
the future growth of standard oil seemed
limitless
but forces were gathering that would
soon threaten
the mighty empire and its king
by 1879 after 15 long years of
intimidation
force and strong arm tactics the
standard oil company controlled
an incredible 90 percent of all refinery
operations in the united states
but rockefeller's overwhelming power
caused some americans to fear
that the free enterprise system was in
danger
without competition there was no force
that could check what standard could do
to prices if it so chose
it's looked upon as the monopoly
the evil trust and it's looked upon at
this point in what it
begins to be known as the american
progressive era as the antithesis of
what america should be
criticism of rockefeller reached
unprecedented levels
his enemies proclaimed that standard oil
was legally chartered only in ohio
and that under the laws of the time the
company had no right to own refineries
or warehouses
in other states
moving quickly to protect himself
rockefeller came up with a brilliant
plan
in 1882 he organized the standard oil
trust
the trust is a legal form of business
organization
and in the latter part of the 19th
century
it was the mechanism by which monopolies
were created
what rockefeller did with all of his oil
companies
he uh in a sense folded them into
the standard trust that en ended up
owning all of the shares
of these companies rockefeller could
control
all of these and operate as a monopoly
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