The weight classification killed Knapp’s business, but a few small independents lived in spite of it. So another move was made on the railroad chess-board. Three great railroads tap the Kansas oil fields: the Santa Fe, the Missouri, Kansas and Texas, and the Missouri Pacific. In August, 1904, just as the Standard finished its pipe line to Kansas City, the rates on crude oil and its products were raised by all the railroads on the field. The rate to Kansas City went up from 10 cents to 17 cents a hundred; and the rate to St. Louis rose from 15 cents to 22 cents. On a carload of fifty-five thousand lbs. the increase in the freight to Kansas City was $38.50, or $93.50 total, and $121 to St. Louis. This was prohibitive. In their testimony given in March last (1905), shippers, even those who were using their own tank cars, declared that the change in rates compelled them to stop business at once and shut down their wells.
The advance in freight was not a part of a general readjustment of rates. It was made alone. And it made oil rates out of all proportion to other rates. The freight from Chanute to Kansas City was $50 for a car of wheat, $40 for corn, $66 for machinery, $28 for cattle, and $30 for a car of fruit, against $93.50 for oil, the least valuable of all, and formerly carried for $50 or $55 a car.
The examiner at the recent Kansas investigation presented the following letter in explanation of the railroads: “The reason the Santa Fe and the ‘Katy’ railroads raised rates on oil after the pipe line was completed was because the Standard’s companies arranged with them to do so, by agreeing to give them a percentage upon every barrel of oil that was run through their pipe lines on condition the railroads would increase the freight rate on oil to a prohibitive rate, so that all the oil would be forced through the pipe line. Now the railroads have no oil, but get about ten cents per barrel for all oil going through the pipe lines.”
This is similar to an arrangement that existed for several years from 1884 on between the Pennsylvania Railroad and the Oil Combine by which the railroad was to have a fixed sum per barrel on 26 percent of all the oil going eastward from the Pennsylvania oil fields, whether the oil went by rail or pipe line,[[300]] in consideration of which the railroad was to put up the rates on oil.
In the Kansas case there are other reasons more direct and powerful perhaps than any traffic arrangement. The Standard people have acquired a large interest in the Santa Fe. One of their strongest and most unscrupulous men, H. H. Rogers, has taken a place on the board of directors. John D. Rockefeller and Wm. Rockefeller are directors of the Missouri, Kansas and Texas, and the Missouri Pacific is one of the principal lines of the Gould-Rockefeller system. There are other indications of the grip the Standard has upon the Kansas railroads. For example, the Colorado Fuel Company that was so greatly favored by the Santa Fe is largely owned and managed by the Standard Oil crowd, and the Standard uses the Santa Fe’s right of way for its pipe lines in Kansas, and for almost the entire distance from Kansas City to Whiting.
Kansas has risen in revolt against the Oil Trust, and the Legislature last year (1905) lowered the freight rates on oil and passed a bill for the establishment of a State refinery to compete with the Standard and give the oil producers of the State a chance to escape from the “commercial tyranny” they are now subjected to in consequence of the fact that there is practically only one buyer in the market. The State Supreme Court, however, has decided that the State refinery act is unconstitutional. The independents might, however, establish a co-operative refinery of their own and do a good business, if they could get equal freight rates and sufficient support from public sentiment to withstand the boycott to which the Standard would be likely to resort. Only the Standard, it is said, can get rates that encourage the shipment of oil from Kansas wells at present. And the Standard custom of putting prices very low where there is competition, keeping prices high in other regions where there is no competition, making the people in non-competitive localities pay the cost of killing competition in other places, is exceedingly effective, as is also its diabolical habit of ruining merchants who buy independent oil, by establishing competing houses close to them and underselling them on the whole line of goods they handle, the Trust’s wide business enabling it to stand such losses easily, as the total is only an insignificant fraction of the profits made in regions where no such fight is in progress.
CHAPTER XXVII.
THE LONG-HAUL ANOMALY.
The long and short haul clause is still broken by the railroads as well as by the Supreme Court, especially in the West and in the South, where the basing-point system causes such grievous discriminations. For example, with a rate of 48 cents from New York to Atlanta and a local rate of 38 cents from Atlanta to Suwanee, the rate from New York to Suwanee is 86 cents, although Suwanee is 31 miles nearer New York than Atlanta. This system is not confined to places that have water competition. A considerable number of towns on the Southern Railway and on the Louisville and Nashville have been made basing-points, though they have no water competition.[[301]]
Jacksonville is the main basing-point in Florida, and rates to other destinations are the rate of Jacksonville plus the local rate from Jacksonville to destination, even though the destination is nearer the point of shipment than Jacksonville.[[302]]
From New Orleans to the “Virginia Cities,” Richmond, Lynchburg, and Norfolk, is about 800 miles. Charlotte, at the southern border of North Carolina, is about half way. Yet the rates to Charlotte on a number of articles are double the rates to the Virginia cities, twice the distance. The Southern Railway and the Seaboard Air Line reach the city, but there is no competition. Water competition must be met in Virginia, but if the Virginia ton-mile rate will pay a profit, is not the fourfold ton-mile rate to Charlotte an exorbitant charge?[[303]]