There were in 1870, in the United States, 250 refineries, which waged among themselves a merciless price-war.
It was to put an end to this struggle, which was so advantageous to the consumer, that the Standard Oil Company was created, a combine of refiners, not of producers. Following a strict and constant principle, which it has always observed, the Standard has refrained from seeking raw oil, leaving this task entirely to the prospectors and producers. But as soon as it reaches the surface, the oil, wherever it is found, becomes the exclusive property of the Company, to whose innumerable refineries it is conducted by pipe-lines. The original Standard Oil Company, that of Ohio, began humbly with a capital of a million dollars, and the small consumption of 600 barrels a day. Established in Cleveland, it grouped together all the interests in the refining and transport of oil acquired in Pennsylvania since 1865 by Rockefeller, Andrews, Harckess and Flager. Two years later, not only had it brought all the refineries in the neighbourhood of Cleveland under its own control, but it had built others at Baltimore, Philadelphia, New York, Boston, and Pittsburgh.
Six years after its inauguration, it already acquired the greater part of the crude oil produced in the United States. Moreover, its capital had been twice increased, in 1872 and 1874.
At the end of ten years, it transported and distributed 95 per cent. of the American output.
In 1881 it amalgamated thirty-nine oil companies. The trust was constituted and already disposed of a capital of 75 million dollars. The first cycle of its growth was finished. Supreme in the United States market and sure of its monopoly, it completed the laying of its first pipe-line to the Atlantic. The Standard Oil was about to lay claim to Europe.
The Agreement of January 2, 1882
Such fortunes were not built up by entirely honourable methods. The directors of the Standard Oil of Ohio had formed pools. They imposed buying and selling prices on every company which participated. This system, which in a dozen years gave such wonderful results, was not without its faults. There was friction between members of the pool. The need for establishing unity of direction was soon felt. It was with this object that the Standard Oil Trust was founded in 1882.
It was the first time that the word "Trust" appeared in the name of a firm. A Committee of nine members, or trustees, was formed. It comprised all the Rockefeller family: John Rockefeller, Payne, William Rockefeller, Bestwick, Flager, Warden, Pratt, Brewster, Archbold. The nine trustees became the sole delegates and depositories of all the 39 companies conjointly engaged. They received from each concern the shares and the corresponding voting powers. Trust Certificates, of a nominal value of 100 dollars, were exchanged for shares only in the proportion of the value of each undertaking to the total value of all the undertakings constituting the Trust.
The Agreement of 1882 which sealed the pact, provided for the admission into the Trust of new companies and the eventual formation of a Standard Oil Company in each State of the Union.