Standard Oil

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Lore & Background

Standard Oil's prehistory began in 1863, as an Ohio partnership formed by industrialist John D. Rockefeller, his brother William Rockefeller, Henry Flagler, chemist Samuel Andrews, silent partner Stephen V. Harkness, and Oliver Burr Jennings, who had married the sister of William Rockefeller's wife. In 1870, Rockefeller abolished the partnership and incorporated Standard Oil in Ohio. The company was established with $1 million in capital. Of the initial 10,000 shares, John D. Rockefeller received 2,667, Harkness received 1,334, William Rockefeller, Flagler, and Andrews received 1,333 each, Jennings received 1,000, and the firm of Rockefeller, Andrews & Flagler received 1,000. In a seminal deal in 1868, the Lake Shore Railroad, a part of the New York Central Railroad, gave Rockefeller's firm a going rate of one cent per gallon or 42 cents per barrel—an effective 71% discount from its listed rates—in return for a promise to ship at least 60 carloads of oil daily and to handle loading and unloading on its own. Standard's actions and secret transport deals helped its kerosene price to drop from 58 to 26 cents from 1865 to 1870. On January 2, 1882, a group of 41 investors signed the Standard Oil Trust Agreement which pooled their securities of 40 companies into a single holding agency managed by nine trustees. The original trust was valued at $70 million. On March 21, 1892, the Standard Oil Trust was dissolved by order of the Supreme Court of Ohio, and its holdings were reorganized into 20 independent companies that formed an unofficial union referred to as "Standard Oil Interests." In 1899, the Standard Oil Company of New Jersey (Jersey Standard) acquired the shares of the other 19 companies and became the holding company for the trust. In 1911, the landmark Supreme Court case Standard Oil Co. of New Jersey v. United States found Jersey Standard guilty of anticompetitive practices and ordered it to break up its holdings. The charge came about in part as a consequence of the reporting of Ida Tarbell, who wrote The History of the Standard Oil Company. The net value of companies severed from Jersey Standard in 1911 was $375 million, which constituted 57% of Jersey Standard's value.

Reader's Guide

Standard Oil's significance lies in its role as a pioneering corporate trust that dominated the American petroleum industry and became the largest corporation in the United States. Its business practices, including secret transport deals and rebates, lowered consumer prices but drew criticism from competitors and led to landmark antitrust legislation. The 1911 Supreme Court decision to break up Jersey Standard set a precedent for antitrust enforcement in the United States. After dissolution, Jersey Standard became the second largest corporation after United States Steel, and many of the severed companies remained powerful, later merging into major oil companies such as Chevron and BP. The company's legacy includes its influence on corporate organization and regulation, as well as the investigative journalism of Ida Tarbell, whose reporting contributed to the antitrust case.

Did You Know?

• The original Standard Oil Trust was valued at $70 million when it was formed on January 2, 1882.
• In 1868, the Lake Shore Railroad gave Rockefeller's firm a 71% discount from its listed rates in return for a promise to ship at least 60 carloads of oil daily.
• Standard's kerosene price dropped from 58 to 26 cents from 1865 to 1870 due to its actions and secret transport deals.
• The net value of companies severed from Jersey Standard in 1911 was $375 million, which constituted 57% of Jersey Standard's value.
• Ida Tarbell's reporting in The History of the Standard Oil Company contributed to the antitrust case against Jersey Standard.