 
              Conspiracy Nation -- Vol. 11  Num. 18
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                     ("Quid coniuratio est?")
 
 
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THE OIL WAR OF 1872
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Most of  the  independent  oil  producers  in  the  Oil Region of
west-central Pennsylvania were young, and they looked forward  to
the years ahead.  They believed they would solve problems such as
railroad  discrimination.   They  would make their towns the most
beautiful in the world.  There was  nothing they did not hope and
dare.

But suddenly, at the very heyday of this confidence, a  big  hand
reached  out  from nobody knew where, to steal their conquest and
throttle their future.  The suddenness  and the wickedness of the
assault on their business stirred to the bottom their manhood and
their sense of fair play, and the whole region arose in a  revolt
which  is  scarcely  paralleled  in the commercial history of the
United States.

In  Cleveland,  young  John  D.  Rockefeller  was also in the oil
business,  as  a  refiner.   Young  Rockefeller  was  a  ruthless
bargainer.  Said one  writer,  "The  only  time  I  ever saw John
Rockefeller enthusiastic was when a report came in from the  [Oil
Region]  that  his  buyer  had secured a cargo of oil at a figure
much below the market price.   He  bounded  from his chair with a
shout of joy, danced up and down, hugged me, threw  up  his  hat,
acted so like a madman that I have never forgotten it."

Gradually, Rockefeller's competitors  began  to  suspect  he  was
somehow  getting  better  shipping  rates from the railroads than
they were.   Because  there  was  fierce  competition between the
railroads at the time, other large oil shippers insisted  on  and
got  their own special rates.  But crafty John Rockefeller seemed
to be getting the best rates of all.

But the railroads were supposed to be COMMON CARRIERS, and had no
right to discriminate between  patrons.   The railroads had also,
as shown by Gustavus Myers in  *History  of  the  Great  American
Fortunes*,  been built largely at the public's expense; huge land
grants  had  been  given  to  them  under  the  premise  that the
railroads would be a benefit to the people of the United  States.
These  land grants had not been merely narrow strips of land, but
vast acreages  filled  with  timber  and  valuable minerals.  The
railroad companies  had  already  gulped  down  a  vast  fortune,
courtesy of the American people via Congressional give-aways.

Rockefeller   had   the   advantage   of  a  complete,  far-flung
organization, even  in  those  early  days:   buyers  in  the Oil
Region, an exporting agent in New York, refineries in  Cleveland,
and  transportation favoritism.  Mr. Rockefeller should have been
satisfied in 1870.  But  Mr.  Rockefeller was far from satisfied.
Those twenty-five Cleveland rivals of his -- how could he at once
and forever put them out  of  the  game?  He and his partners had
somehow conceived a great idea -- the advantages of  COMBINATION.
What  might  they not do if they could buy out and absorb the big
refineries now competing with them in Cleveland?  The Rockefeller
corporation,  Standard  Oil,  began  to  sound  out  some  of its
Cleveland rivals.

But there was still a problem:  What about their  rivals  in  the
Oil Region of Pennsylvania?  They could ship to refineries on the
eastern  sea-coast.   And  the  Pennsylvania Railroad was helping
them; they  shipped  in  volume  and  the  railroad  gave  them a
discount.

Aligned with the Cleveland crowd were the Lake Shore and New York
Central  Railroads.   If  the  Oil  Region  won  the   developing
competition, these railroads would lose business. 

All  the  competition was causing a problem for Rockefeller.  The
price of refined oil was  steadily  falling.  This was *good* for
the average American who bought the oil, but bad  for  these  few
wheeler-dealers.   Mr. Rockefeller and friends looked with dismay
on their decreasing profits.

In the fall of 1871, certain refiners brought to Rockefeller  and
friends  a  scheme,  the  gist  of  which  was  to bring together
secretly a large enough body of refiners and shippers -- a SECRET
COMBINATION -- to persuade all the railroads handling oil to give
to  the  company  formed  special  rebates  on  oil  shipped, and
*drawbacks* (raised rates) on that  of  other  people.   If  they
could  get  such rates it was evident that those outside of their
combination could not  compete  with  them  long  and that *they*
would become, eventually, the dominant refiners.  They could then
*limit* their output to actual demand, and so keep up prices.

The railroads went along with the deal so they could stop  having
to cut each other's throats through their rate wars -- they would
stop  competing  among  themselves,  keep  their  rates high, and
thereby gouge the  unsuspecting  public.   The  railroads, it was
agreed, were  to  receive  a  regular  amount  of  freight:   the
Pennsylvania  was  to have 45 percent of the eastbound shipments,
the Erie and the Central each 27.5 percent; the westbound freight
was to  be  divided  equally  between  them  --  fixed rates, and
freedom from competition amongst themselves.

The first thing was to get  a CHARTER -- *quietly*.  At a meeting
held in Philadelphia in 1871 mention had been made that a certain
estate then in liquidation had a charter for sale which gave  its
owners  the right to carry on any kind of business in any country
and in any way.  This  charter  was promptly purchased.  The name
of the charter was the "South Improvement Company."

Under the threat of this SECRET COMBINE,  known  blandly  as  the
"South  Improvement  Company,"  almost the entire independent oil
interest of Cleveland collapsed.  From a capacity  of  less  than
1500  barrels  of crude per day, the Standard Oil Company rose in
three months' time to over 10,000 barrels per day.  It had become
master of more than  one-fifth  of  the  refining capacity of the
United States.  Its  next  individual  competitor  was  Sone  and
Fleming,  of  New  York, whose per day capacity was 1700 barrels.
The transaction by which Standard  Oil acquired this power was so
stealthy  that  not  even  the  best-informed  newspaper  men  of
Cleveland knew what went on.  It had  all  been  accomplished  in
accordance   with   one   of  Mr.  Rockefeller's  chief  business
principles -- "Silence is golden."

But one man had  not  been  let  in  on  the deal with the "South
Improvement  Company."   He  had been a past enemy of some of the
Erie Railroad  directors.   In  revenge,  that  man began telling
people in the Oil Region what was going on.  At first, people did
not believe the rumors.  But when independent oil producers there
learned that their freight rates had suddenly gone up  by  nearly
100  percent,  they believed.  It was a conspiracy, and it worked
against them.

The rise in freight rates  promised  to  ruin the Oil Region.  On
the morning of February 26, 1872, the morning  papers  told  how,
somehow,  all  members  of  the  "South Improvement Company" were
exempted from the rise in freight  rates.  On every lip there was
but one word,  and  that  was  "conspiracy."   In  fury,  crowded
meetings  were  held  at Titusville, Pennsylvania and then at Oil
City, Pennsylvania.  The temper was war-like; banners proclaimed,
"Down With the  Conspirators!"   A  Petroleum Producers Union was
organized.  It was agreed that no new oil wells would be started,
production would halt on Sundays, no oil was to be sold to anyone
belonging to  the  "South  Improvement  Company,"  the  offending
railroads were to be boycotted, and *new* railroad lines would be
built  and  controlled  by  the  Petroleum  Producers  Union.   A
committee   was   sent   to   the  U.S.  Congress,  demanding  an
investigation on the ground  that  the "South Improvement" scheme
was an interference with trade.  The whole  body  of  Oil  Region
producers  became  intent on destroying the "Monster," the "Forty
Thieves," the "Great  Anaconda,"  as  they  called the mysterious
"South Improvement Company."

The sudden  uprising  of  the  Oil  Regions  against  the  "South
Improvement  Company"  did  not  alarm its members at first.  The
excitement would die out, they  told  one another.  All that they
needed was to keep quiet.  But the excitement did  not  die  out.
Instead, it became more intense and more wide-spread.

The  stopping  of  the  oil  supply  finally  forced  the  "South
Improvement   Company"  to  recognize  the  Producers  Union.   A
compromise was sought.   But  the  producers  responded that they
believed the "South Improvement Company" meant to monopolize  the
oil  business.   A  compromise would not be considered.  Said the
Producers Union:  We can no more negotiate with you than we could
sit down to negotiate with a burglar.

The Congressional Investigation into  all  this was NOT PUBLISHED
officially, and NO  TRACE  of  its  work  can  now  be  found  in
Washington.   But  the  Petroleum Producers Union published their
own report, called "A History of  the  Rise and Fall of the South
Improvement Company."  This report contained the  full  testimony
taken by the Congressional Committee.

Nothing could have been more damaging than the publication of the
charter  of  the  "South  Improvement  Company."  The charter was
described by "South Improvement's" president, Peter H. Watson, as
"a sort of clothes-horse to hang  a scheme upon."  As a matter of
fact it was a clothes-horse big enough to hang  the  earth  upon.
It granted powers practically unlimited.

When   the  course  of  this  charter  through  the  Pennsylvania
Legislature came to be  traced,  it  was  found to be devious and
uncertain.  The company had been incorporated in 1871, and vested
with all the "powers, privileges, duties and obligations"  of  an
earlier   company   --   incorporated   in  April,  1870  --  the
Pennsylvania  Company;  both  of   them  were  children  of  that
interesting body known as the "Tom Scott Legislature."   The  act
incorporating  the  company was not published until after the oil
war; its sponsor  was  never  known.   The  origin  of the "South
Improvement Company" has always remained in darkness.  It was one
of several "improvement" companies chartered in  Pennsylvania  at
about  the  same  time,  and  enjoying the same commercial *carte
blanche*.

The chairman of the  Congressional  Committee declared in disgust
that the  success  of  the  members  of  the  "South  Improvement
Company"  meant "the destruction of every refiner who refused for
any reason to join your company, or whom you did not care to have
in, and it put the  producers  entirely  in your power.  It would
make a monopoly such as no set of men are fit to handle."

The U.S. public became convinced  that  the  Petroleum  Producers
were  right  in their opposition.  The newspapers (not then under
monopoly control themselves,  as  they  are  now;  see *The Media
Monopoly* by Ben Bagdikian) were in sympathy with the people.  It
was ROBBERY, cried newspapers throughout the U.S. Said  the  *New
York  Tribune*,  "Under the guise of assisting in the development
of oil-refining in Pittsburg  and Cleveland, this corporation has
simply laid its hand upon the throat of the oil traffic..."   And
if  this  could  be done in the oil business, what was to prevent
its being done in any  other  industry?  Why should not a company
be formed to control wheat or beef or iron or steel, as  well  as
oil?   The  "South  Improvement  Company,"  it  was agreed, was a
menace to the free trade of the country.

It now began  to  be  generally  said,  "This is a transportation
question."  The sentiment against discrimination  on  account  of
amount  of freight or for any other reason had been strong in the
country since its beginning, and it now crystalized.  Nothing was
more common than to  hear  on  the passenger trains, within which
occurred  the  real  public  forum  of  the  time,  conversations
explaining that the railways derived their  existence  and  power
from  the  people,  that  their  charters were contracts with the
people, that a fundamental provision  of these contracts was that
there should be no discrimination in favor of anyone, that such a
discrimination was a violation of  charter,  that  therefore  the
"South  Improvement  Company"  --  the  "clothes-horse  to hang a
scheme upon"  --  was  founded  on  fraud,  and  the  courts must
dissolve it if the railways did not abandon it.

But the railways (for public consumption) *did* CLAIM to  abandon
the  deal.   Explained  railroad king "Commodore" Vanderbilt:  "I
told Billy (son, W.H. Vanderbilt) not to have anything to do with
that scheme."   The  Erie  and  the  Atlantic  and  Great Western
railroads privately  offered  the  Petroleum  Producers  Union  a
special  deal  similar  to  that  offered  the "South Improvement
Company," but the reaction  was  shocked  outrage.  It had seemed
impossible to the railroad men  that  the  oil  producers  really
meant  what  they said about no discrimination in rates.  But the
Oil War of 1872  was  an  uprising  against an injustice, and the
moral wrong of the thing had taken a deep hold of the Oil  Region
and its people.

The  railroads  were  finally  obliged  to  consent to revoke the
special  contracts  and  to  make  new  ones  providing  that all
shipping of oil should be made on a fair and equitable basis.  On
March 28, 1872, the railroads officially annulled their contracts
with the "South Improvement Company."

Now that the thing seemed settled, the question was,  "Should  we
let  bygones  be  bygones?"   Would the oil producers sell to the
Cleveland refiners?  It happened  that  almost nothing could wipe
out the memory of the recent excitement and loss  which  the  Oil
Region  had  suffered.  No triumph could stifle suspicion.  There
henceforth could be no trust  in  those  who had devised a scheme
intended to rob the producers of their property.  And it was  the
Standard  Oil Company of Cleveland which was at the bottom of the
business, and the "Mephistopheles  of  Standard  Oil" was John D.
Rockefeller. All who sold to Rockefeller were called "traitors."

And  "Mephistopheles"  Rockefeller  was, even then, busy plotting
his next  move.   The  "South  Improvement  Company" would merely
"shift gears" and work under the  charter  of  the  Standard  Oil
Company.   Read  a  headline  in  the  Cleveland  Herald:  "South
Improvement Company *alias* Standard Oil Company."

Even as the railroad people were *publicly* saying they would not
discriminate, *privately* they  were  giving Rockefeller the same
special deals as before.  Rockefeller said to Vanderbilt,  I  can
make  a  contract  to ship a great quantity of oil, every day, on
your railroad -- *BUT*, not unless you give me a concession.  And
Mr. Vanderbilt made the  concession  *even  while he was publicly
pretending  otherwise.*  Says  Rockefeller  to  Vanderbilt   (and
Vanderbilt  nods,  "yes"):   "Remember:   Silence  (*omerta*)  is
golden." 

[Synopsis  of  *The  History  of the Standard Oil Company* by Ida
Tarbell]

 +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +

For related stories, visit:
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http://feustel.mixi.net

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Aperi os tuum, decerne quod justum est, et judica inopem et 
  pauperem.                    -- Liber Proverbiorum  XXXI: 8-9 




