The Standard Oil Corporation was among the largest, most influential companies in the Progressive Era. By 1900, it had established a near monopoly in the American oil production industry. John D. Rockeeeller, a self-made entrepreneur, was the driving force behind the company. Despite having little formal education, Rockefeller built one of the most profitable corporations in American history and helped revolutionize the nature of business. Shortly after oil was discovered in Titusville, Pennsylvania, in 1859, the Cleveland, Ohio, area became one of the centers of the oil refining industry. Within a short period of time there were dozens of competing refineries located in and around the city. In 1863, Rockefeller and his partner Maurice Clark joined the fray and established an oil refining business near Cleveland. Initially the industry was extremely chaotic. Dozens of different companies focused on isolated aspects of the production process, and all attempted to undercut the profitability of their competitors. In addition, because each aspect of production was independent, there was great inefficiency. Using the profits he made to expand his company, Rockefeller began squeezing out or buying up competing refineries.
In 1867, Rockefeller, along with his brother William Rockefeller, Samuel Andrews, Henry M. Flagler, and S. V. Harkness, pooled their resources to create the Standard Oil Corporation with a capital outlay of $1 million. By 1872, Standard Oil controlled 10 percent of the oil refining industry. Rockefeller was determined to control every aspect of the industry, including drilling, refining, transportation, sales, and distribution. He ruthlessly exploited the size of Standard Oil to force concessions and lower rates from the railroads. Once these lower rates were secured, Rockefeller was able to undercut other competitors and soon dominated the Cleveland market. By 1882, Standard Oil controlled over 90 percent of the oil refining industry. Throughout the rest of the century, Rockefeller expanded his oil empire to include ownership of oil wells, railroads, refineries, and distribution facilities throughout the country. He could set oil prices at whatever level he desired. Popular resentment about the power of new national corporations such as Standard Oil led to passage of the Sherman Antitrust Act of 1890. The legislation was intended to
Political cartoon depicting a Standard Oil tank as an octopus with its tentacles wrapped around the steel, copper, and shipping industries as well as a state house and the U. S. Capitol while one tentacle reaches for the White House (Library of Congress)
Prevent companies from monopolizing an entire industry. In actual practice, however, the Sherman Act was invoked only infrequently and then typically directed against organized labor.
In the first decade of the 20th century, popular resentment against monopolies and trusts intensified. Muckraking journalists exposed political and corporate corruption, further fueling demands that the federal government intervene and break the power of the monopolies. In 1902, McClure’s Magazine began publishing a series of 18 articles exposing the way in which Rockefeller built and maintained his oil empire. Written by journalist Ida M. Tarbell, The History of Standard Oil (1904) galvanized public and political opposition against the company and helped convince the federal government to look into possible antitrust violations. President Theodore Roosevelt had promised to enforce the antitrust legislation and take an aggressive stand against illegal trusts and monopolies. In 1906, Roosevelt, claiming Standard Oil was 20 times larger than its nearest competitor, instructed the federal government to take action. The case wasn’t resolved until 1911 when the Supreme Court ruled that the company had in fact violated federal antitrust laws and ordered that the company be broken into smaller, independent parts.
For a period of time, the Supreme Court’s decision to break up Standard Oil had the desired impact. Even before the court ruling, it had become clear that Standard Oil’s domination of the industry had begun to wane. Several new competitors entered the field before 1911, including Texaco (1902), Shell (1907), and British Petroleum (1909). By the time it was dissolved, Standard Oil controlled only 65 percent of the industry. The Supreme Court ruling against Standard Oil broke the giant into 34 smaller companies.
Eventually, however, several large corporations dominated the industry. Known as the Seven Sisters, Esso, Shell, Amoco, Chevron, Atlantic Richfield, British Petroleum, and Texaco extended their control over all aspects of the industry, both in the United States and around the world.
Further reading: Ron Chernow, Titan: The Life of John D. Rockefeller, Sr (New York: Random House, 1998); Glen Porter, The Rise of Big Business, 1860-1910 (New York: Cornell, 1973).
—Robert Gordon
World History
