Standard Oil and the age of trusts

On January 10, 1870, John D. Rockefeller, his brother William, Henry Flagler, Samuel Andrews and others formed the Standard Oil Company in Cleveland, Ohio. Within a decade it had bought or squeezed out most of its competitors and controlled about 90 percent of American oil refining. In 1882 the company's holdings were gathered into the Standard Oil Trust, whose legal structure gave its name to the era of 'trusts', the giant consolidated businesses of the Gilded Age.¹

The industry began with the first commercial oil well at Titusville, Pennsylvania in 1859, and refiners sold mostly kerosene for lamps. Prices swung wildly in the boom and bust of the oil regions, and Rockefeller, a former bookkeeper, offered stability through scale. He cut costs by running efficient, large refineries and making his own barrels, and he won secret rebates from the railroads, which sent them his oil in bulk and shipped it at lower rates than rivals paid. In 1871 and 1872 the South Improvement Company scheme to fix rail rates, tied to Standard, provoked an uproar in the oil regions. Rockefeller bought out refiners in Cleveland in a few months, often offering them shares or cash, though critics said that he gave them little choice.¹

The company's size set off a political reaction. Journalists such as Ida Tarbell, whose History of the Standard Oil Company appeared in 1904, exposed its methods, and the Sherman Antitrust Act of 1890 and later state suits attacked its power. In 1911 the US Supreme Court ordered Standard Oil broken into 34 separate companies, whose successors include Exxon, Mobil and Chevron. The case set the principle that monopolies can be dismantled, and the era of trust-busting shaped modern antitrust policy. Rockefeller, who had left day-to-day management in the 1890s, became one of the richest people in history and a major philanthropist.¹²