How the whole question appeared to an intelligent oil man, one, too, who had had the courage to resist in the attack on the trade in Cleveland, and who still was master of his own refinery, is shown by the following letter to the Cleveland Herald:
Eds. Herald: As I understand, the financial success of this South Improvement Company is based upon contracts made with the officers (either individually or otherwise) of all the railroads leading out of the Oil Region, by which they (the South Improvement Company) receive as a drawback certain excess of freights, not only on every barrel of oil shipped out of the Oil Regions by or to themselves, but also on every barrel of oil shipped out of the Oil Regions by or to other refiners, or dealers, or consumers.
The first advance in freights to Cleveland has already been made, viz.: on crude oil, from forty cents to sixty-five cents per barrel. This seemingly slight advance has already caused one party that I know of to pay an excess of over $2,000. Other firms have paid larger or smaller sums, according to the quantity of oil they were compelled to have. This excess, we suppose, goes directly to swell the profits of the South Improvement Company.
This is only the beginning. The whole extent of the evil that may be done to producers, refiners, dealers and consumers, and to the public generally, if this corporation—or rather combination of corporations—is successful, is so deep and varied and far reaching, that it cannot be fully comprehended and I will not attempt it in detail, but only suggest a few inquiries.
Where will be their limits?
How high will they advance freights?
How low will they force the price of crude?
How high refined?
Will they adopt a liberal policy for producers, or will they destroy their interests and crush out the oil production entirely? Will they be liberal with dealers and consumers and adopt uniform rules with steady prices, or will they take advantage of times and circumstances and force ruinous corners upon the trade?
These and many other questions are pertinent, for clearly if they can control the shipment they can control the price of oil, and if they can control the price to the extent of twenty-five cents per barrel, they can control it entirely. If they can control it entirely, where will be their limit? Who will dictate a line of policy to them? And may not one of the greatest and most important industries of this country be destroyed and hundreds of thousands of business men be made bankrupt if this combination is successful and has the disposition to work ruin? I do not say that I think they will work ruin. They undoubtedly will attempt to make all the money they can and will pursue such a policy as in their judgment will bring them the utmost amount of profits, regardless of consequences, but what that policy will be, of course, we can not judge.
It is understood that the parties to this combination excuse themselves and their action before the public by reciting the undoubted facts in the case. They are these: that the refining of oil as a business has been of late and is now overdone; that the capacity for refining petroleum in this country exceeds the production in the ratio of three barrels to one; that the railroads have reduced freights to the lowest extreme, and were even losing money; that refiners, in spite of all their efforts, could not earn their running expenses; that the special interests of Cleveland as a refining point were in danger of being lost; and that this great business might go to other points, and the millions of dollars in refining property here be sacrificed, and thousands of men thrown out of employment; that real estate would depreciate, and that many other collateral troubles connected with the loss of this business would follow; and that now, by the consummation of the plans of this monopoly, all these evils will be avoided.
In answer to this—assuming that the refining interest of Cleveland is a unit in this corporation, that of Pittsburg another, that of New York another, and that of Philadelphia another—it follows that it is immaterial to the stockholders of the “South Improvement Company” whether the oil produced at the Oil Regions is refined by them at their works in Cleveland, or at Pittsburg, or in New York, or in Philadelphia. It would not affect their dividends at all, provided they refined the oil at the cheapest point for them to do so. That place might be Cleveland; it might be Pittsburg, or it might not be either of them; but it might be New York or Philadelphia. Therefore, so long as it is for the pecuniary advantage of this combination to refine at Cleveland they may do so, but no longer, and should it be for the interest of the combination to discontinue their works at Cleveland, what would become of the oil-refining interest at this point? That question everyone can answer. Therefore I see little weight to the argument used that this monopoly is for the benefit of Cleveland. Hence, I do not consider the special danger to Cleveland by any means as averted.
But without discussing this position, its advantages or disadvantages, as an oil-refining center—for it has both in a marked degree—on general principles I will assert that the laws of business and manufacturing interests, like the laws of supply and demand, are unchangeable, and that a prosperity such as this monopoly would bring us is a forced prosperity, consequently not permanent, but temporary and fictitious in character, and damaging in its ultimate results; and more than all this, if the refining prosperity of Cleveland could be re-established permanently by means of the success of this monopoly, we could not afford to accept it at the cost proposed, viz., that of enriching ourselves at the expense of those who are weaker, but are in power.
We have just refused to build an opera house because we should, by using the only means we could command to do so, compromise our morality. How much more emphatically should we refuse to accept any benefits to our city which have their origin in unmitigated fraud! In the opera house instance just cited the managers use no compulsion, no unwilling man was to be forced by them to buy a ticket and take his chances; but the South Improvement Company force every producer to take a less price for his oil without rendering him an equivalent.
They force every refiner who is in their way to prosecute his business against them as competitors at fearful odds, and perhaps at the expense of a royalty on every barrel; or to sell his works and abandon his business to the South Improvement Company at any paltry price they may dictate.
They also force every consumer of oil on this broad continent, after paying all the legitimate cost of producing, refining, and transportation on oil, to pay them also an additional tribute—for what? Absolutely nothing.
The railroad companies derive their existence and power to act under charters granted them by the citizens (through their Legislatures) of the several states in which they exist. This charter is a contract made by and between the citizens of the one part and the railroad company on the other, and both parties bind themselves alike to the faithful performance of the conditions of the contract. One of the fundamental provisions of this contract is that there shall be no discrimination shown to any individuals, or body of individuals, as to facilities or privileges of doing business with such railroad company; on the contrary, the railroad company is expressly required in all cases to charge uniform rates for the transportation of freight and passengers.
They must, if desired, carry the freight for A that they do for B, AND ALWAYS AT THE SAME PRICE. Any deviation from this stipulated condition is a wilful and fraudulent violation of their contract. If it is by means of such violations of contracts on the part of the several railroad companies connected with them that the South Improvement Company expects success, then the whole gigantic STRUCTURE IS ESTABLISHED UPON FRAUD AS A BASIS, AND IT OUGHT TO COME DOWN.
Very respectfully,
F. M. Backus.
Cleveland, Ohio, March 5, 1872.
The oil men now met the very plausible reasons given by the members of the company for their combination more intelligently than at first. There were grave abuses in the business, they admitted; there was too great refining capacity; but this they argued was a natural development in a new business whose growth had been extraordinary and whose limits were by no means defined. Time and experience would regulate it. Give the refiners open and regular freights, with no favours to any one, and the stronger and better equipped would live, the others die—but give all a chance. In fact, time and energy would regulate all the evils of which they complained if there were fair play.
HENRY H. ROGERS IN 1872
Now President of the National Transit Company and a director of the Standard Oil Company. The opposition to the South Improvement Company among the New York refiners was led by Mr. Rogers.
The oil men were not only encouraged by public opinion and by getting their minds clear on the merits of their case; they were upheld by repeated proofs of aid from all sides; even the women of the region were asking what they could do, and were offering to wear their “black velvet bonnets” all summer if necessary. Solid support came from the independent refiners and shippers in other parts of the country who were offering to stand in with them in their contest. New York was already one of the chief refining centres of the country, and the South Improvement Company had left it entirely out of its combination. As incensed as the creek itself, the New York interests formed an association, and about the middle of March sent a committee of three, with H. H. Rogers, of Charles Pratt and Company, at its head, to Oil City, to consult with the Producers’ Union. Their arrival in the Oil Regions was a matter of great satisfaction. What made the oil men most exultant, however, was their growing belief that the railroads—the crux of the whole scheme—were weakening.
However fair the great scheme may have appeared to the railroad kings in the privacy of the council chamber, it began to look dark as soon as it was dragged into the open, and signs of a scuttle soon appeared. General G. B. McClellan, president of the Atlantic and Great Western, sent to the very first mass-meeting this telegram:
New York, February 27, 1872.
Neither the Atlantic and Great Western, nor any of its officers, are interested in the South Improvement Company. Of course the policy of the road is to accommodate the petroleum interest.
G. B. McClellan.
A great applause was started, only to be stopped by the hisses of a group whose spokesman read the following:
Contract with South Improvement Company signed by George B. McClellan, president for the Atlantic and Great Western Railroad. I only signed it after it was signed by all the other parties.
Jay Gould.