Wealth against commonwealth

by Henry Demarest Lloyd

"Did you ever know of a case of any man's derrick and apparatus being blown up in the oil region before the formation of this association?" one of the shut-downers was asked.

"I could not say that I do."[289]

The owner of the apparatus destroyed, it was stated by the press, had been repeatedly requested to join the shut-down, but had refused. There were several such occurrences, recalling the affairs at the Buffalo refinery in 1885.[290] When the people in Pennsylvania saw apostles of the gospel of making oil cheap enter into a bargain with them to make it scarce, it is not surprising that they should have become bewildered to the point of thinking that the noise of nitro-glycerine was "good talk," and should have sunk into the depression, monetary and moral, that alone could make such haggard faces rise among an honest laborious people.

We have seen how the refiners who pass under the control of the trust are compelled to make monthly reports. The same perfectness of discipline appears at once among the producers in this shut-down. Every one of them had to make monthly reports of how much oil he had taken out of the earth. If the mobilization of industry goes on at the rate of recent years, it will not be long—not later, perhaps, than the end of the nineteenth century—before all producers, and all makers, will be sending monthly reports to New York of grain, cattle, iron, wool, lumber, leather, and the manufactures of them to trustees, whose "pleasure it is to try to make them"—the men as well as the commodities—"cheap." The supervision by means of these monthly reports was so close that over-production, however minute, was immediately known. If the owner of a well over-produced only the one-hundredth of a barrel, he got a notice to go slower.[291]

To the producers engaged in it the result of the shut-down was that when their representatives at the end of it called on the oil combination in New York for the profits on the 5,000,000 barrels of oil set apart for them, as agreed, they were given a check for a sum between $200,000 and $250,000.[292] This was divided among those who had co-operated—nearly one thousand—in proportion to their share in the good work of making the supply of the light of the people so much "less per day." The drama of industry has not many scenes more striking than this of these men—the principal producers of the oil country, which had yielded in the thirty years up to this time more than 300,000,000 barrels of oil—going to the great syndicate in New York to buy the privilege of restricting the production of their own wells, thankfully accepting the scanty profits on a speculative deal in the oil exchange of 5,000,000 barrels, receiving with emotions of enthusiasm a check for a couple of hundred thousand dollars for a year's "co-operation" from the men who had made out of their product hundreds of millions.

The shut-down was a great disappointment in prices. The average price of petroleum at the wells for October, the month before the shut-down, was 70-7/8 cents a barrel. The highest monthly price reached during the restriction was 93-5/8, in March, 1888. The average for October, 1888, the last month of the year originally agreed upon, was 90-5/8. By a subsequent understanding the restriction was continued until July, 1889. The price then was 95-1/8. At no time during the shut-down was the coveted dollar mark maintained, and it was barely touched in March, 1888, after which there was a sharp decline to 71-3/8 in June, with savage losses to "the lambs." High prices did not come until the accumulation of 6,000,000 barrels set aside "for the use" of the producers had been sold out. After that there were in the winter following—1889-90—a few months in which the price rose, as to $1.12½ in November, 1889, but it sank the year following to 60¾ in December, 1890, and it continued to go down until crude oil reached 50 cents in October, 1892, the lowest point known since there was an oil market.[293]

The men with whom the producers made their bargain, shrewder than they, and versed in the dynamics of the markets, knew that the effect of setting apart 6,000,000 barrels of oil would be ultimately depressive to prices, not stimulating. Not knowing when or at what price this vast amount would be unloaded, buyers, both for use and for speculation, would be made timid, and prices would be held in check. The shut-down produced a great gambling mania. Untold millions were lost by men in the oil country, who gambled on the exchanges to make the profits of the expected advance. Local panics, bank failures, ruin in all its shapes, were the escort of shame and loss which marched with the shut-down. Curiously enough, it was those who speculated for the rise who were the losers. There was against them an element which knew better than they what prices were going to be, for it made them. It is this ability of insiders to bet on a certainty which has been the destruction of the oil exchanges. From Pittsburg to New York they are now practically all dead.

The amount of the reduction effected by the shut-down, independent of a natural decline which had set in some months before, has been estimated at 11,000,000 to 15,000,000 barrels. The production ran down from 25,798,000 barrels in 1886 to 21,478,883 in 1887, and 16,488,688 in 1888. In 1889 it was up to 21,487,435 again, and in 1890, 29,130,910.