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Standard Oil (1870–1911) was a large, integrated, oil producing, transporting, refining, and marketing organization.
Standard Oil Refinery No. 1 in Cleveland, Ohio, 1899
Standard Oil Refinery No. 1 in Cleveland, Ohio, 1899
Standard Oil began as an Ohio partnership formed by the well-known industrialist John D. Rockefeller, his brother William Rockefeller, Henry Flagler, chemist Samuel Andrews, and a silent partner Stephen V. Harkness. Using highly effective and widely criticized tactics, Standard Oil absorbed or destroyed most of its competition in Cleveland, Ohio, then throughout the northeastern United States, putting numerous small corporations out of business.
In response to state laws attempting to limit the scale of companies, Rockefeller and his partners had to develop innovative ways of organizing so that they could effectively manage their increasingly giant enterprise. In 1882, they combined their disparate companies, spread across dozens of states, under a single group of trustees. This organization proved so successful that other giant enterprises adopted this "trust" form. At the same time, state and federal laws sought to counter this development with "anti-trust" laws. Ohio successfully sued Standard Oil, compelling the dissolution of the trust in 1892. Standard Oil fought this decree, in essence separating off only Standard Oil of Ohio without relinquishing control of that company. Eventually, New Jersey changed its incorporation laws to allow a single company to hold shares in other companies in any state. Thus, in 1899, the Standard Oil Trust was legally reborn as a holding company -- a corporation known as the Standard Oil Company of New Jersey.
Eventually, the U.S. Justice Department sued Standard Oil of New Jersey under the federal anti-trust law, the Sherman Antitrust Act of 1890. In 1911, the Supreme Court upheld the lower court judgment, and forced Standard Oil to separate into 34 companies, each with its own distinct board of directors. Standard's president, John D. Rockefeller had, by then, long since retired from any management role and became simply a shareholder in each of the new companies. They formed the core of today's U.S. oil industry, including ExxonMobil (formerly Standard of New Jersey and Standard of New York), ConocoPhillips (the Conoco side, which was Standard's company in the Rocky Mountain states), Chevron (Standard of California), Amoco and Sohio (Standard of Indiana and Standard of Ohio, respectively, now BP of North America), Atlantic Richfield (the Atlantic side, now also a part of BP North America), Marathon (covering western Ohio and other parts of Ohio not covered by Sohio) and many other smaller companies.
* 1 Origins of the Standard Oil Company
* 2 Business strategy of Standard Oil
* 3 Monopoly charges, anti-trust litigation, and breakup of the Standard Oil group
* 4 Legacy
* 5 Successors
* 6 See also
* 7 References
* 8 External links
Origins of the Standard Oil Company
Oil was first struck in Titusville, Pennsylvania in 1859 which began the first oil rush. The main product of the oil business was kerosene, which was rapidly supplanting whale oil as the choice fluid for oil lamps due to its lower cost. However, the cost and quality of kerosene at that time varied greatly based on the way it was refined. In 1863, British chemist Samuel Andrews had developed a superior method of refining oil into kerosene and was looking for investors to set up a refinery. He found an investor in John D. Rockefeller. In 1865, Rockefeller was so confident of the growth of the oil business that he purchased additional refining capacity and formally partnered with Andrews to form Rockefeller and Andrews. Soon afterward, Cleveland became one of five major refining areas (along with Pittsburgh, Philadelphia, New York, and the region in Northeastern Pennsylvania where most of the oil was produced). At about the same time Rockefeller's brother, William, started another refinery. In 1867 Rockefeller & Andrews absorbed this business and the business of Henry Morrison Flagler to form the partnership of Rockefeller, Andrews & Flagler.
Cleveland with its port on Lake Erie and service by the three major railroads of the day was a logical center for oil refining. Standard sought to leverage this advantage with favorable rates from the competing railroads, using that advantage to underprice the competition and buy out its weakest rivals. Given their low prices and superior "standardized" product, Standard steadily grew its market share. The larger it grew, the more power they had, and exercised, over their suppliers, including the oil producers and railroads, to get better deals. By the early 1870s, Standard was so dominant that even well-run rivals could no longer effectively compete. In 1874, Rockefeller acquired the oil interests of Charles Pratt and Company, one such competitor with both superior management and product, but without the economies of scale Standard had been able to achieve. The founder Charles Pratt (1830-1891) and his protégé Henry Huttleston Rogers (1840-1909) became directors in Standard Oil. In 1882, when the company was reorganized as the Standard Oil Trust, the senior partners were John D. Rockefeller, his brother William, and Rogers.
Business strategy of Standard Oil
Standard Oil's market position had been established through an emphasis on efficiency and responsibility. While most companies dumped gasoline (this being before the automobile) in rivers, Standard used it to fuel the company's own machines. Where gigantic mountains of heavy waste grew by other companies' refineries, Rockefeller found ways to market and sell these waste products, creating the synthetic first competitor for beeswax, as well as acquiring the company that invented and produc