Ida Tarbell

“ For instance, why should oil be sold to a dealer at nearly four cents more on an average in Kansas than in Kentucky, when the freight from Whiting to Kansas is only a cent more? For no reason except that in Kentucky there has been persistent competition for twenty-five years, and in Kansas none has ever secured a solid foothold. Why should Colorado pay an average of 16.90 cents for oil per gallon and California 14.60 cents, when the freight from Whiting differs but one-tenth of one cent? ”

“ Of course there is nothing else to be expected when one body of men control a market.
Thus far the illustrations of Mr. Rockefeller's use of his power over the oil market have been drawn from export oil. It is the only market for which "official" figures can be obtained for the entire period, and it is the market usually quoted in studying the movement of prices. It is of this grade of oil that the largest percentage of product is obtained in distilling petroleum. For instance, in distilling Pennsylvania crude, fifty-two per cent. is standard-white or export oil, twenty-two per cent. ”

“ Indeed, any consecutive study of the Standard Oil Company's use of its power over the price of either export or domestic oil must lead to the conclusion that it has always been used to the fullest extent possible without jeopardising it; that we have always paid more for our refined oil than we would have done if there had been free competition. ”

“ Rockefeller has not been able to keep, but from 1879 to the present day there has not been a time when he has not controlled over eighty per cent, of the oil manufacturing of the country. To-day he controls about eighty-three per cent.
Now it is generally conceded that the man or men who control over seventy per cent. of a commodity control its price—within limits, very strict limits, too, such is the force of economic laws. In the case of the Standard Oil Company the control is so complete that the price of oil, both crude and refined, is actually issued from its headquarters. ”

“ Freights and handling considered, there is, it is evident, nothing like a settled price or profit for illuminating oil in the United States. Now, there is no one who will not admit that it is for the good of the consumer that the normal market price of any commodity should be such as will give a fair and even profit all over the country. That is, that freights and expense of handling being considered, oil should sell at the same profit in Texas as in Ohio. That such must be the case where there is free and general competition is evident. ”

“ People who point to the differences in price, and call it combination, have never studied the price-line history in hand. They do not know the meaning of the variation of the line; that it was forced down from 1866 to 1876, when Mr. Rockefeller's first effective combination was secured by competition, and driven up in 1876 and 1877 by the stopping of competition; that it was driven down from 1877 to 1879 by the union of all sorts of competitive forces—producers, independent refiners, the developing of an independent seaboard pipe-line—to a point lower than it had ever been before. ”

“ A glance at the chart is enough to show that the home market has suffered more violent, if less frequent, fluctuations than the export market. A suggestive observation for the consumer is the effect of a rise in crude on the price of domestic oil. The refined line usually rises two or three points to every one of the crude line. It is interesting to note, too, how frequently high domestic prices are made to offset low export prices; thus, in 1889, when the Standard was holding export oil low to fight competition in Europe, it kept up domestic oil. ”

“ He and his colleagues went into their first venture, the South Improvement Company, not simply because it was a quick and effective way of putting everybody but themselves out of the refining business, but because, everybody but themselves being put out, they could control the output of oil and put up its price. "There is no man in this country who would not quietly and calmly say that we ought to have a better price for these goods," the secretary of the South Improvement Company told the Congressional Committee which examined him when it objected to a combination for raising prices. ”

“ In 1872 there was a daily refining capacity of about 46,000 barrels in the country, and the daily consumption of that year had been but 15,000 barrels. This large capacity produced the liveliest competition in selling, and every year the margin of profit grew smaller.
Now it is natural that men should struggle to keep up a profit. The refiners had become accustomed to making from twenty-five per cent. to fifty per cent. and even more, on every gallon of oil they put out. They had the same extravagant notion of what they should make as the oil producers of those early days had. ”

“ It has not been possible for us to allow even the church, inspired by religious ideals, to have the full power it has demanded in society. And yet we have here in the United States allowed men practically autocratic powers in commerce. We have allowed them special privileges in transportation, bound in no great length of time to kill their competitors, though the spirit of our laws and of the charters of the transportation lines forbade these privileges. ”

“ Every investigation made since shows that it is the touch of the competitor which brings down the price. For instance, in the cost and profit sheet from a Standard ledger referred to above, there was one station on the list at which oil was selling at a loss. On investigation the writer found it to be a point at which an independent jobber had been trying to get a market. If one examines the tables of prices in the recent report of the Industrial Commission, he finds that wherever there is a low price there is competition. ”

“ The increasing competition in Western Europe of independent American oils, and the rapid rise since 1895, particularly of Russian oil, are what has kept this margin down. It is doubtful, such is the growing strength of these various competitive forces, if the Standard Oil Trust will ever be able to put up the margin on export oils. If there were only the American independents to reckon with, a compromise might be possible, but Russia, Burmah and Sumatra are all in the game. ”

“ A typical oil farm of the early days
marketing trick, they get a fancy price. The Standard Oil Company has a great number of fancy brands of both illuminating and lubricating oils, for which they get large prices—although often the oil itself comes from the same barrels as the ordinary grade. Now it is from the extra price obtained from naphtha, water-white, fancy brands, and by-products that the independent refiner makes up for his loss on export oil, and the Standard Oil Trust raises its dividends to forty-eight per cent. ”

“ But why should we expect anything else? This is the chief object of combinations. Certainly the candid members of the Standard Oil Company would be the last men to argue that they give the public any more of the profits they may get by combination than they can help. ”

“ There is made each day in New York what is known as an official quotation for refined oil, this official quotation being made as a matter of convenience in cabling the price of refined oil throughout the world. Refined oil not being sold at an open board, it is sometimes difficult to quote it accurately, but by having an 'official quotation' this can be quoted, and the difficulty is supposed to be, in a measure at least, remedied. ”

“ As a result of the Standard's power over prices, not only does the consumer pay more for oil where competition has not reached or has been killed, but this power is used steadily and with consummate skill to make it hard for men to compete in any branch of the oil business. ”

“ And as their new industry slowly but surely came under the laws of trade, increased its production, was subjected to severe competition, as they saw themselves, in order to sustain their business, forced to practise economies and to accept smaller profits, they loudly complained. There was never a set of men who found it harder to accept the limitations of economic laws than the oil producers of Pennsylvania. The oil refiners showed the same dislike of the harness, and in 1871, as we have seen, Mr. Rockefeller and a few of his friends combined to throw it off. ”

“ A. Certainly; an individual or a combination of men can advance the price or more or less depress the price of any commodity.
Q. But if you desire to increase—to put up the price of the refined oil, or to put down the price of the crude oil, is it within your power to do it, in the way I have indicated, by staying out of the market or going into the market to purchase, controlling 75 per cent, of the demand for the crude oil? ”

“ Russian oil had, from the beginning, been a possible menace to American petroleum, for the wonderful fields on the Caspian were known long before oil was "struck" in Pennsylvania. They did not begin to be exploited in a way to threaten competition until late in the eighties. In 1885 consuls at European ports began to report its appearance—fifty barrels were landed at Bremen that year as against 180,855 of American oil. In this year, too, the first Russian oil went to Asia Minor, where "Pratt" oil had long held sway. ”

“ In the month of April of 1904 150° oil was selling from tank-wagons in Baltimore, where there is competition, at 9 cents. In Washington, where there is no competition, it sold at 101⁄2 cents, and in Annapolis (no competition) at 11 cents. In Seaford, Delaware, the same oil sold at 8 cents under competition. The freight rates are practically the same to all these points. And so one might go on indefinitely, showing how the introduction of an independent oil has always reduced the price. ”

“ If one will look at the chart showing the fluctuations from 1879, when control was achieved, to the beginning of 1889, one will find that for ten years the margin between refined oil and crude never fell below the point reached by competitive influences in the former year, though frequently it rose considerably above. Yet it is in this period that the Standard did all its great work in extending markets, in developing by-products, and in introducing the small and varied economies on which it rests its claim to be a great ”

“ They learned a lesson in these years they have never forgotten—that when you make a scoop it must not be so big that you will never have a chance to make another one; that if you want to keep your power to manipulate the market you must use that power so modestly that the public in general will not realise you have it. Again and again the effect of the experiences of 1872, 1876 and 1880 crops out in the testimony of Standard officials. ”

“ Q. By stopping the manufacture of refined oil your refineries representing so large a proportion would tend to raise the price?
A. That is something we never do; our business is to increase all the time, not to decrease.
...........
Q. Really your notion is that the Standard Oil Trust is a beneficial organisation to the public?
A. I beg with all respect to present the record which shows that it is. [15]
For many of the world it is a matter of little moment, no doubt, whether oil sells for eight or twelve cents a gallon. ”

“ The most curious feature perhaps of this question of the Standard Oil Company and the price of oil is that there are still people who believe that the Standard has made oil cheap! Men look at this chart and recall that back in the late sixties and seventies they paid fifty and sixty cents a gallon for oil, which now they pay twelve and fifteen cents for. ”

“ Where the Standard has the advantage is in its ownership of oil transportation. A common carrier gathering and transporting in 1902 all but perhaps 10,000 barrels of the 150,000 barrels' daily production of Eastern oil, the service for which the outsider pays sixty cents, costs it from ten to twelve cents at the most liberal estimate. ”

“ The 'official quotation' is made by three petroleum brokers appointed by the Produce Exchange for that purpose, who meet each day after exchange hours for the purpose of establishing it. There is one party, and one party only, that have very large lots to sell, and so important a position do they hold in the business that their prices are ordinarily the market. ”

“ We have allowed them to combine in great interstate aggregations, for which we have provided no form of charter or of publicity, although human experience long ago decided that men united in partnerships, companies, or corporations for business purposes must have their powers defined and be subject to a reasonable inspection and publicity. ”

“ That this was the fact seems to be proved by the quotations for water-white oil from tank-wagons, which were published from week to week in trade journals like the Oil, Paint and Drug Reporter. These prices show 97⁄8 cents for water-white on March 21, and an average of 9.4 cents in April. Evidently only a part of the trade of "all Greater New York and vicinity" got the benefit of averages quoted to the Industrial Commission by Mr. Archbold.
If competition persists the result usually has been permanently lower prices than in territory where competition has been run out or has never entered. ”