The oil industry in the United States expanded rapidly between 1900 and 1930 as it tried to keep pace with the nation’s energy demands. In particular, the expansion of industrial production and the widespread ownership of automobiles resulted in an insatiable demand for oil and gasoline. An important part of the nation’s industrial development in the 1860s and 1870s, oil was first drilled in the United States in 1859 in Titusville, Pennsylvania. Initially, the oil refining industry was centered in three locations— Cleveland, Pittsburgh, and Philadelphia—and characterized by numerous small competitors. The crude oil was pumped from wells, chemically refined into kerosene, and then used primarily in the growing illumination industry. In 1867, John D. Rockeeeller formed the Standard Oil Company and quickly began to dominate the industry. Rockefeller was determined to control every aspect of the industry including drilling, refining, transportation, sales, and distribution. As Standard Oil grew larger, Rockefeller used the company’s power and wealth to buy out competitors and secure preferential transportation rates from the railroads. In 1872 Standard Oil controlled 10 percent of the industry. A decade later, the company controlled 90 percent. In 1882, Rockefeller combined all of the companies he had purchased to form the Standard Oil Trust. Less than a decade later, Rockefeller had expanded his oil empire to include ownership of oil wells, railroads, refineries, and distribution facilities throughout the country and could set oil prices at whatever level he desired.
By 1900, Standard Oil dominated the oil industry as one of the most powerful companies in the country. The way in which Rockefeller controlled the industry, determined prices, and eliminated competition worried muckraking journalists and progressive reformers. In 1904, McClure’s Magazine published a series of articles by Ida Tarbell that exposed the way in which Rockefeller built his oil empire and the ruthless way in which he maintained it. Collectively published in 1904 as The History of Standard Oil, the articles helped convince the federal government to investigate possible antitrust violations. President Theodore Roosevelt had promised to enforce the Sherman Antitrust Act of 1890 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 against the corporation. 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, in order to spur competition, the company be broken into smaller, independent parts.
Between 1900 and 1930, oil became more and more profitable. As it did, oil companies began investing vast sums of money in exploration and development. No
Oklahoma well strikes oil. (Library of Congress)
Longer able to meet demand by finding oil reserves that had seeped to the earth’s surface, companies began drilling deep underground. Oil companies hired university-trained scientists and geologists to analyze soil samples and rock formations in order to predict the location of new underground reserves. When a huge underground “gusher” was discovered in Beaumont, Texas, in 1901, it started an oil boom that lasted until the onset of the Great Depression. The new crude oil discovered in California and on the Gulf Coast of Texas yielded extremely high levels of fuel oil. After the discovery of the Beaumont gusher, the center of the domestic oil industry shifted to Texas.
Demand for oil was at an all-time high as industrial production increased. Factories, which had once been little more than small workshops, grew in size and complexity. The Ford Highland Park auto plant, for example, opened in 1910 and by 1917 employed 36,000 auto workers. The plant was highly automated, and it used massive amounts of gasoline and oil. The spread of the assembly line and mass production resulted in a corresponding growth in the oil industry. By 1919, gasoline had become the oil industry’s best-selling product, accounting for approximately 45 percent of all sales. Technological innovations increased the purity of the gasoline produced. In 1914, Standard Oil of Indiana developed a “cracking” process that yielded a higher-octane gasoline. By eliminating impurities, automobile manufacturers were able to develop more powerful and efficient engines.
For a period of time, the Supreme Court’s decision to break up Standard Oil had the desired impact. Even before the Court’s ruling, it had become clear that the company’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 (So = Standard Oil), 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.
While industrial expansion helped spur the growth of the oil industry, it was the development of widespread automobile ownership that made the industry one of the wealthiest and most important in the country. In 1900, there were fewer than 2,500 registered automobiles. By 1929, the number had jumped to a staggering 26.7 million. Throughout the country, the local filling station became as common and as essential as the local bank.
The impact the oil industry had on the nation between 1900 and 1930 is impossible to overstate. Electricity, a rarity prior to 1900, also had become commonplace in most cities and spread rapidly to rural areas as well. By 1930, the country had become completely dependent upon gasoline and electricity. Homes were lighted and heated by gas and electricity. Food was stored and prepared using gas and electricity. In fact, by 1930, oil companies in the United States were producing over 3 million barrels of oil per day, and every aspect of daily life and the health of the American economy had become dependent upon oil.
Further reading: Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Shaped (New York: Bantam Books, 1976); Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon and Schuster, 1991).
—Robert Gordon
World History
