53
pay shareholders. By careful design, the inner workings of the Trust and even its
very existence were hidden behind a maze of legal maneuvers, corporate figureheads, and paper constructs that made the umbrella organization essentially invisible and impervious to public scrutiny. As one investigative reporter noted at the
time, “You could argue its existence from its effects, but you could not prove it”
(Tarbell and Chalmers 1966).
Rockefeller claimed only to be seeking efficiencies of scale, and some revisionists have stated there is no real evidence that he built up a monopoly through the
practice of predatory pricing (e.g. Armentano 1990). However “efficient” it may
have been for the large-scale production and distribution of petroleum products, the
excessive concentration of economic power in the Standard Oil Trust was viewed by
many Americans with alarm.
The first gasoline-powered, two-cycle internal combustion engine was built in
1870 by a German inventor named Siegfried Marcus, who used it to propel a pushcart. Another German named Nikolaus Otto received a patent in 1886 for the
improved four-stroke engine that can still be found under the hood of most modern
vehicles. Karl Benz, yet a third German, built a gasoline-powered automobile in
1885, and then proceeded to manufacture and sell several identical copies, thus
creating the first “production model” car (Eckermann 2001). Early automobiles
were typically hand-crafted one at a time, and remained little more than European
curiosities known as “horseless carriages” until the early twentieth century. In 1908,
Henry Ford created a car for the “everyman” – the Model T. The factory assembly
line was perfected by Ford in 1913, and the Model T Ford became the first massproduced and affordable automobile. Total sales of the Model T topped 15 million
by 1927 (Eckermann 2001), and every single one of them needed gasoline. Gasoline
sales in the U.S. exceeded kerosene in 1919 and thereafter.
The nineteenth century business model of the Standard Oil Trust was largely
based on the refining and sale of “illumination oil” for lamps. As this market was
displaced by Thomas Edison’s electric lighting, Rockefeller and company became
increasingly focused on supplying gasoline as fuel for automobiles. The significant
mechanization of the military in World War I also showed that oil was a strategic
asset required for ships, vehicles, and aircraft. The growing demand for petroleum
resulted in the expansion of Standard Oil into oil exploration, production, and transport and it quickly became a multi-armed, corporate behemoth (Chernow 1998).
Business people pay close attention to what others are doing, and Standard Oil
was not the only trust for long. The growing problem of trusts caught the attention
of Senator John Sherman of Ohio, who at the time was chairman of the Senate
Finance Committee (General Records of the United States Government 1890).
Sherman proposed a law to authorize the federal government to dissolve trusts
based on the constitutional power of Congress to regulate interstate commerce. The
Sherman Anti-Trust Act passed the Senate by a vote of 51–1 on April 8, 1890, and
the House by a unanimous vote of 242–0 on June 20, 1890. President Benjamin
Harrison signed the bill into law on July 2, 1890. Restraint of commerce among
states or with foreign nations by means of a trust or monopoly was declared illegal
(General Records of the United States Government 1890).
3.2 Spindletop, Gushers, and the Advent of Big Oil
pay shareholders. By careful design, the inner workings of the Trust and even its
very existence were hidden behind a maze of legal maneuvers, corporate figureheads, and paper constructs that made the umbrella organization essentially invisible and impervious to public scrutiny. As one investigative reporter noted at the
time, “You could argue its existence from its effects, but you could not prove it”
(Tarbell and Chalmers 1966).
Rockefeller claimed only to be seeking efficiencies of scale, and some revisionists have stated there is no real evidence that he built up a monopoly through the
practice of predatory pricing (e.g. Armentano 1990). However “efficient” it may
have been for the large-scale production and distribution of petroleum products, the
excessive concentration of economic power in the Standard Oil Trust was viewed by
many Americans with alarm.
The first gasoline-powered, two-cycle internal combustion engine was built in
1870 by a German inventor named Siegfried Marcus, who used it to propel a pushcart. Another German named Nikolaus Otto received a patent in 1886 for the
improved four-stroke engine that can still be found under the hood of most modern
vehicles. Karl Benz, yet a third German, built a gasoline-powered automobile in
1885, and then proceeded to manufacture and sell several identical copies, thus
creating the first “production model” car (Eckermann 2001). Early automobiles
were typically hand-crafted one at a time, and remained little more than European
curiosities known as “horseless carriages” until the early twentieth century. In 1908,
Henry Ford created a car for the “everyman” – the Model T. The factory assembly
line was perfected by Ford in 1913, and the Model T Ford became the first massproduced and affordable automobile. Total sales of the Model T topped 15 million
by 1927 (Eckermann 2001), and every single one of them needed gasoline. Gasoline
sales in the U.S. exceeded kerosene in 1919 and thereafter.
The nineteenth century business model of the Standard Oil Trust was largely
based on the refining and sale of “illumination oil” for lamps. As this market was
displaced by Thomas Edison’s electric lighting, Rockefeller and company became
increasingly focused on supplying gasoline as fuel for automobiles. The significant
mechanization of the military in World War I also showed that oil was a strategic
asset required for ships, vehicles, and aircraft. The growing demand for petroleum
resulted in the expansion of Standard Oil into oil exploration, production, and transport and it quickly became a multi-armed, corporate behemoth (Chernow 1998).
Business people pay close attention to what others are doing, and Standard Oil
was not the only trust for long. The growing problem of trusts caught the attention
of Senator John Sherman of Ohio, who at the time was chairman of the Senate
Finance Committee (General Records of the United States Government 1890).
Sherman proposed a law to authorize the federal government to dissolve trusts
based on the constitutional power of Congress to regulate interstate commerce. The
Sherman Anti-Trust Act passed the Senate by a vote of 51–1 on April 8, 1890, and
the House by a unanimous vote of 242–0 on June 20, 1890. President Benjamin
Harrison signed the bill into law on July 2, 1890. Restraint of commerce among
states or with foreign nations by means of a trust or monopoly was declared illegal
(General Records of the United States Government 1890).
3.2 Spindletop, Gushers, and the Advent of Big Oil