Captain Hasson and those who were working with him would have had a much more difficult task in arousing the producers to action if it had not been for the general dissatisfaction over the price of oil. The average price of crude in the month of August, 1872, was $3.47½. The year before it had been $4.42½, and that was considered a poverty price. It was pretty certain that prices would fall still lower, that “three-dollar oil” was near at hand. Everybody declared three dollars was not a “living price” for oil, that it cost more than that to produce it. The average yield of the wells in the Oil Region in 1872 was five barrels a day. Now a well cost at that time from $2,500 to $8,000, exclusive of the price of the lease. It cost eight to ten dollars a day to pump a well, exclusive of the royalty interest—that is, the proportion of the production turned over to the land-owner, usually one-fourth.[[28]] If a man had big wells, and many of them, he made big profits on “three-dollar oil,” but there were comparatively few “big producers.” The majority of those in the business had but few wells, and these yielded only small amounts.
If he had been contented to economise and to accept small gains, even the small producer could live on a much lower price than three dollars; but nobody in the Oil Regions in 1872 looked with favour on economy, and everybody despised small things. The oil men as a class had been brought up to enormous profits, and held an entirely false standard of values. As the Derrick told them once in a sensible editorial, “their business was born in a balloon going up, and spent all its early years in the sky.” They had seen nothing but the extreme of fortune. One hundred per cent. per annum on an investment was in their judgment only a fair profit. If their oil property had not paid for itself entirely in six months, and begun to yield a good percentage, they were inclined to think it a failure. Now nothing but five-dollar oil would do this, so great were the risks in business; and so it was for five-dollar oil, regardless of the laws of supply and demand, that they struggled. They were notoriously extravagant in the management of their business. Rarely did an oil man write a letter if he could help it. He used the telegraph instead. Whole sets of drilling tools were sometimes sent by express. It was no uncommon thing to see near a derrick broken tools which could easily have been mended, but which the owner had replaced by new ones. It was anything to save bother with him. Frequently wells were abandoned which might have been pumped on a small but sure profit. In those days there were men who looked on a ten-barrel (net) well as hardly worth taking care of. And yet even at fifty cents a barrel such a well would have paid the owner $1,800 a year. The simple fact was that the profits which men in trades all over the country were glad enough to get, the oil producer despised. The one great thing which the Oil Regions did not understand in 1872 was economy. As a matter of fact the oil-producing business was going through a stage in its natural development similar to oil refining. Both, under the stimulus of the enormous profits in the years immediately following the discovery of oil, had been pushed until they had outstripped consumption. The competition resulting from the inrush of producers and refiners and the economies which had been worked out were bringing down profits. The combinations attempted by both refiners and producers in these years were really efforts to keep up prices to the extravagant point of the early speculative years.
Now the drop in the price of oil everybody recognised to be due to a natural cause. Where a year before the production had been 12,000 barrels a day, it was now 16,000. The demand for refined had not increased in proportion to this production of crude, and oil stocks had accumulated until the tanks of the region were threatening to overflow. And there was no sign of falling off. Under these circumstances it needed little argument to convince the oil men that if they were to get a better price they must produce no more than the world would use. There was but one way to effect this—to put down no new wells until the stocks on hand were reduced and the daily production was brought down to a marketable amount.
Under the direction of the Producers’ Association an agitation at once began in favour of stopping the drill for six months. It was a drastic measure. There was hardly an oil operator in the entire region who had not on hand some piece of territory on which he was planning to drill, or on which he had not wells under way. Stopping the drill meant that all of the aggressive work of his business should cease for six months. It meant that his production, unreplenished, would gradually fall off, until at the end of the period he would have probably not over half of what he had now; that then he must begin over again to build up. It meant, too, that he was at the mercy of neighbours who might refuse to join the movement, and who by continuing to drill would drain his territory. It seemed to him the only way of obtaining a manageable output of crude, however, and accordingly, when late in the month of August the following pledge to stop the drill was circulated, the great majority of the producers signed it:
Whereas, The extreme low price of oil requires of producers that operations therefor shall cease for the present: Now we, the producers, land-owners and others, residents of the Pennsylvania Oil Region, do hereby bind ourselves to each other not to commence the drilling of any more wells for the period of six months from the first day of September next, not to lease any lands owned or controlled by us for the purpose of operations during the same period, and we also agree to use all honourable means to prevent others from boring. This we agree to, and bind ourselves to each other under a forfeiture of $2,000 for each well commenced by either of us within the period above limited—the same to be collected as any other debt. It is, however, understood by the undersigned that this forfeiture is not to apply to any wells where the erection of rigs is completed or under way, or that may be commenced before the first day of September aforesaid.
The chief objection to this pledge came from land-owners in Clarion County. They were the “original settlers,” plodding Dutch farmers, whose lives had always been poor and hard and shut-in. The finding of oil had made them rich and greedy. They were so ignorant that it was difficult to transact business of any nature with them. It was not unusual for a Clarion County farmer, if offered an eighth royalty, to refuse it on the ground that it was too little, and to ask a tenth. A story used to be current in the Oil Regions of a producer who, returning from an unsuccessful land hunt in Clarion County was asked why he had not secured a certain lease. “Well,” he said, “farmers wanted seven-eighths of the oil as a royalty, wanted me to furnish barrels and to paint both heads. I agreed to everything but the last. I could afford to paint but one head, and so he wouldn’t sign the lease.” When the proposition to stop the drill for six months was brought to these men, who at the time owned the richest territory in the oil field, no amount of explanation could make them understand it. They regarded it simply as a scheme to rob them, and would not sign. Outside of this district, however, the drill stopped over nearly all the field on the first of September.
There was nothing but public opinion to hold the producers to their pledge. But public opinion in those days in the Oil Regions was fearless and active and asserted itself in the daily newspapers and in every meeting of the association. The whole body of oil men became a vigilance committee intent on keeping one another loyal to the pledge. Men who appeared at church on Sunday in silk hats, carrying gold-headed canes—there were such in the Oil Region in 1872—now stole out at night to remote localities to hunt down rumours of drilling wells. If they found them true, their dignity did not prevent their cutting the tools loose or carrying off a band wheel.
Stopping the drill afforded no immediate relief to the producers. It was for the future. And as soon as the Petroleum Producers’ Association had the movement well under way, it proposed another drastic measure—a thirty days’ shut-down—by which it was meant that all wells should cease pumping for a month. Nothing shows better the compact organisation and the determination of the oil producers at this time than the immediate response they gave to this suggestion. In ten days scarcely a barrel of oil was being pumped from end to end of the Oil Regions. “That a business producing three million dollars a month, employing 10,000 labouring men and fifty million dollars of capital, should be entirely suspended, dried up, stopped still as death by a mutual voluntary agreement, made and perfected by all parties interested, within a space of ten days—this is a statement that staggers belief—a spectacle that takes one’s breath away,” cried the Derrick, which was using all its wits to persuade the producers to limit their production. It was certainly a spectacle which saddened the heart, however much one might applaud the grim resolution of the men who were carrying it out. The crowded oil farms where creaking walking-beams sawed the air from morning until night, where engines puffed, whistles screamed, great gas jets flared, teams came and went, and men hurried to and fro, became suddenly silent and desolate, and this desolation had an ugliness all its own—something unparalleled in any other industry of this country. The awkward derricks, staring cheap shanties, big tanks with miles and miles of pipe running hither and thither, the oil-soaked ground, blackened and ruined trees, terrible roads—all of the common features of the oil farm to which activity gave meaning and dignity—now became hideous in inactivity. Oil seemed a curse to many a man in those days as he stood by his silent wells and wondered what was to become of his business, of his family, in this clash of interests.
While the producers were inaugurating these movements, Captain Hasson and a committee were busy making out the plan of the permanent association which was to control the business of oil-producing and prevent its becoming the slave of the refining interest. The knowledge that such an organisation was being worked out kept the oil country in a ferment. In every district suggestions, practical and impractical, wise and foolish, occupied every producers’ meeting and kept the idle oil men discussing from morning until night. At one mass-meeting the following resolution was actually passed by a body of revengeful producers:
Resolved, that to give a wider market throughout the world to petroleum, to enhance its price and to protect producers from unjust combinations of home refiners, a committee be appointed to ask the representatives of foreign governments at Washington to request their respective governments to put a proper tariff on refined oil and to admit crude oil free into the ports of their respective governments.