Standard Oil

“ The case of petroleum is peculiarly instructive. When it became apparent, in the early years of the present century that oil burning ships, motor vehicles and air craft were bound to play a determining part in the economic life of the immediate future, various interests such as the Shell Transport, Royal Dutch and the Standard Oil, with the open or tacit backing of their respective state departments, entered on a campaign to secure the world's supply of petroleum. ”

“ They extended their markets in foreign countries, so that now the Standard sells the larger part of its products outside the United States. They established chemical research laboratories which devised new and inexpensive methods for refining the product and developed invaluable byproducts, such as paraffin, naphtha, vaseline, and lubricating oils. It is impossible to study the career of the Standard Oil Company without concluding that we have here an example of a supreme business intelligence working in a field which gave the widest possible scope of action. ”

“ So far as the petroleum trade is concerned an enterprise or investment therein is only a wager as to what step the Standard Oil combination will next take. With the world consuming double the amount of our petroleum that it did in 1871, the thirty millions which should be received from the crude product has dwindled to its half ”

“ The Standard Oil Companies own hundreds of thousands of acres of oil-lands, and wells, refineries, and many thousand miles of pipe-lines throughout the United States. They have business houses in the principal cities of the Old World as well as the New, and carry their oil in their own great oil-steamships abroad as easily as in their pipe-lines to the American seaboard. They control the greater part of the petroleum business of this country, and export much of the oil used abroad. ”

“ In 1873 and 1874, when we stipulated for those 4,000 per day, if anybody has followed the progress of the Standard Oil Company they would know and I feel justified in saying that we have done a very large business, and aimed to do it with economy and give the purchaser the very best oil manufactured, consistent with a good and safe kind of oil—to manufacture at one point under the eye of one man. ”

“ A curious impression seems to have gained ground to the effect that the Standard Oil Company does not want to sell oil for fuel. It may be stated authoritatively that the company is not only able but willing to sell and deliver oil for fuel purposes in any quantity that may be desired. ”

“ The said producers are guaranteed by said Standard Oil Company of New York against loss within said year upon said 5,000,000 barrels of petroleum. The lessening of 17,500 barrels per day above provided shall embrace and include any reduction or lessening of production by producers who shall sign contracts not to use means to increase their production by drilling or otherwise. ”

“ Mr. O'Day, manager of the Standard Oil Company, met the general freight agent of the Western and Lake Erie Railroad and our Mr. Terry, at Toledo, about February 12, and made an agreement (verbal) to carry their oil at ten cents per barrel. ”

“ Again, 1,000 barrels of crude oil are to be carried to the seaboard for the same amount of money that will be required for carrying there 715 barrels of refined, notwithstanding that crude oil is a much more hazardous article of freight, from fire, than refined. If this is not a very large discrimination in favour of seaboard refiners, for which there is no compensation given to refiners in the Oil Region, our perceptions are utterly weak. ”

“ They can be made more or less viscous, flowing, heavy, light, according to the needs of the machines and the idiosyncrasies of individuals who run them. The man who runs a machine soon knows what oil suits him, and if his trade is big enough an oil is put up especially for him with a name to tickle his vanity. It may be exactly like a dozen other oils on the market, but having its own name it is reckoned a new product. Skilful compounders insist that they can duplicate any of the 833 lubricating oils of the Standard if they can have samples. ”

“ As a matter of fact, the Standard's ability to cut off crude supplies from the outside refiners is much greater than in the days before the Interstate Commerce Bill, when it depended on its alliance with the railroads to prevent its rival getting oil. It goes without saying that this is an absurd power to allow in the hands of any manufacturer of a great necessity of life. It is exactly as if one corporation aiming at manufacturing all the flour of the country owned all but ten per cent. ”

“ Most of these characters are common to petroleum from various places. In one important respect, however, the product of your lands differs from that obtained in other situations, that is, it does not, by continued exposure to the air, become hard and resinous like mineral pitch or bitumen. I have been informed by those who have visited the locality, that on the surface of the earth above the springs which furnish your oil there is no crust or deposit of this sort such as have seen in other situations where petroleum or mineral tar is flowing. ”

“ This product, called a distillate, was treated with chemicals, washed with water, and run off into the tin-lined tank, where it was allowed to settle. Anybody who could get the apparatus could "make oil," and many men did—badly, of course, to begin with, and with an alarming proportion of waste and explosions and fires, but with experience they learned, and some of the great refineries of the country grew out of these rude beginnings.
Luckily not all the men who undertook the manufacturing of petroleum in these first days were inexperienced. ”

“ Unless the producers will co-operate with us, first, by limiting the production or the capacity of the markets of the world to absorb petroleum at a good price; and, secondly, by tanking a large part of the production for the next two or three months, that it may be withheld from the market until the present glut is exhausted and production reduced, it will be impossible, I am convinced from recent advices of the state of supply and demand in the principal markets of the world, to keep the price of crude oil up to $3.50, and of refined oil up to twenty-two cents, during the coming summer. ”

“ This control can be kept in the domestic markets so long as the Standard can keep under competition as successfully as it has in the past. It can be kept in the foreign market as long as American oils can be made and sold in quantity cheaper than foreign oils. Until a decade ago the foreign market of American oils was not seriously threatened. Since 1895, however, Russia, whose annual output of petroleum had been for a number of years about equal in volume to the American output, learned to make a fairly decent product; more dangerous, she had learned to market. ”

“ An organisation to protect the oil capital is imperatively needed. Oil to yield a fair profit should be sold for twenty-five cents per gallon. That price would protect every interest and cover every outlay for getting out the crude petroleum, transporting by railroad, refining and the incidental charges of handling, etc. The foreign markets will regulate the price to a great extent, because they are the greatest consumers. The people of China, Germany, and other foreign countries cannot afford to pay high prices. ”

“ 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 ”

“ I stated to you in the strongest terms the desire of the South Improvement Company to enter into an arrangement for a series of years with the producers, whereby good prices for crude oil at the wells and fair and reasonable rates of transportation would at all times be assured. The desire still exists. ”

“ Oil had risen to fourth place in the exports of the United States in the twelve years since its discovery, and every year larger quantities were consumed abroad, but it was crude oil, not refined, which the foreigners were beginning to demand; that is, they had found they could import crude, refine it at home, and sell it cheaper than they could buy American refined. France, to encourage her home refineries, had even put a tax on American refined. ”

“ There is a large number of refineries in the country—a great deal larger than is required for the manufacture of the oil produced in the country, or for the want of the consumers in Europe and America; the capacity of the oil refineries in the country is, I think, 45,000 or 50,000 barrels a day ”

“ Its efforts to drive out the independent refineries by the manipulation of the railroads drove the producers and refiners to combine. The heavy charges for handling oil by the Standard pipe-line and by the railways drove these independents to build a seaboard pipe-line for both refined and crude, and to demonstrate that refined as well as crude could be pumped to the sea in pipes. The buying out of their foreign agents forced them to develop their own market in Europe. ”

“ 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. ”

“ Only 8 percent, that is 2.48 billion barrels of the oil out of the potential 31 billion barrels of oil, and 10 percent of the natural gas, 23.1 trillion cubic feet of the 231 trillion cubic feet of natural gas, are accessible under standard leasing terms. ”

“ Of a truth, we to-day live in an age of Oil, for the products of petroleum are inseparable from our daily life. Refined petroleum breathes the breath of power to the internal combustion engine which claims a realm of its own on land and sea, in the air, and under ocean waters; it also gives artificial light to countless millions in all corners of the world under a variety of circumstances and dissimilar conditions, while the wheels of industry unceasingly revolve consequent upon oil lubrication. ”

“ Oils are also artificially produced from the so-called waste-products of the gas-works, but in some parts of the world the process of their manufacture has gone on naturally, and a yearly increasing quantity is being utilised. In England oil has been pumped up from the carboniferous strata of Coalbrook Dale, whilst in Sussex it has been found in smaller quantities, where, in all probability, it has had its origin in the lignitic beds of the Wealden strata. Immense quantities are used for fuel by the Russian steamers on the Caspian Sea, the Baku petroleum wells being a most valuable possession. ”

“ Others are deprived of a part of their more volatile constituents by spontaneous evaporation, or by distillation, in vacuo or otherwise, at the lowest possible temperature. Such are known as “reduced oils”.
In most petroleum-producing countries, however, and particularly where the product is abundant, the crude oil is fractionally distilled, so as to separate it into petroleum spirit of various grades, burning oils, gas oils, lubricating oils, and (if the crude oil yields that product) paraffin. ”

“ Thirty thousand poods are equivalent to one hundred and twenty-five thousand gallons; multiplied by twenty-four it gives the unprecedented yield of three million gallons a day. Estimating thirty gallons to the barrel, we have a well flowing one hundred thousand barrels of oil daily! This is something never dreamed of by the wildest petroleum speculator in America. A single well of the Baku district is producing more oil than the aggregate of all the petroleum wells in the United States. ”

“ But a more interesting commodity which the U.S.S.R. has begun to put on the market in bigger quantities was oil.
In approximately the last half of 1953 the U.S.S.R. made agreements to ship to free-world countries about 3.5 million metric tons of crude petroleum, kerosene, diesel fuel, and other petroleum products. The countries due to receive the largest amounts—if delivered—were Finland, France, and Argentina. Other customers were Greece, Italy, Iceland, Denmark, Sweden, Israel, and the Netherlands. ”

“ Many years ago, fuel oil made its serious début, but at that time the supply of the product was very uncertain, and, consequently, progress in passing from the old to the new form of power-raising was slow. To-day, however, matters have materially changed. The crude oil output has been immeasurably increased, and many fields whose production of crude oil is essentially suited for fuel purposes have been opened up. ”

“ There is also another phase of the oil-refining industry which, during recent years, has materially altered. I refer to the production of solar oil during distillation. It is an apt saying that we can scarcely look to any section of our commercial or domestic life without being confronted with the fact that oil products play some part therein: there are few, however, who, without reflection, would agree that when they light their gas they are dependent upon petroleum for much of the light the gas gives. ”

“ Taking first the methods of oil transportation by land, in no other oil-producing country do we find such an elaborate system for dealing with enormous quantities of petroleum as in America, for it is safe to say that at least 500,000 barrels of crude oil have to be dealt with daily at the present time. ”