Causes of the Success of the Standard
The difficulty is not to produce oil, but to transport it, for it is generally found in more or less desert regions. Hence Rockefeller's brilliant idea, to construct pipe-lines bringing the oil direct to the great centres! Thenceforward, since the oil was transported almost automatically, its price dropped considerably. All the producers became tributaries of the pipe-lines, and the Standard obtained practically complete control of the market.
This was the first cause of the success of the Standard. All the small producing companies became compulsorily its clients. As controller of the market, it fixed the price in draconian fashion.
There is a second cause: its alliance with the great railway companies, and the support which it received from the railway magnates—Scott of the Pennsylvania Railroad, Vanderbilt of the New York Central, Jewet of the Erie Railroad, Watson of the Lake Shore, and many others less well known.
Its subsidiary, the South Improvement Company, on January 18, 1872, made contracts with the railway companies, by which it fixed the proportionate shares in the transport of oil to the Atlantic seaboard as follows:—
27-1/2 per cent. to the Erie,
27-1/2 per cent. to the New York Central,
45 per cent. to the Pennsylvania.
The companies thus favoured by the Standard made their competitors pay double rates. One of these latter produced before the Inter-State Commerce Commission the scandalous tariffs demanded of them:
On the Louisville and Nashville Railroad, increased rates to competitors of 87 to 333 per cent.;
On the Cincinnati, New Orleans, and Texas Pacific, from 63 to 267 per cent.;
On the St. Louis, Iron Mountain and Southern, from 82 to 257 per cent.
Systematic negligence in transport was proved with regard to competitors. The Union Tank Line Company, which owns tank-wagons as the International Sleeping Car Company owns restaurant cars, would only put them at the disposal of the Standard, and compelled its adversaries to dispatch their oil in barrels, which is much more costly. The Trust alone was entitled to lay its pipe-lines beside the railway-lines or underneath the track. It possessed 35,000 miles of such lines at the end of last century—or rather the National Transit Line, which acts as its instrument, owned them. Such abuses could not be allowed to continue. The inquiry by the Hepburn Committee revealed a multitude of crying injustices. For example, it was enough for the Standard or the South Improvement to telegraph "Wilkinson and Co. have received a truck which only paid $41.50; screw them up to $57.50," and the order was executed.
The Charter of the South Improvement, which had even succeeded in acquiring the right of expropriation in order to construct its pipe-lines, was withdrawn under the pressure of indignant oil-producers. But the Federal Government of the United States will never succeed in crushing the Standard Oil.