Titan
Page 25
Rockefeller was similarly suspicious of any boasting or ostentation among associates. One day, he was riding on a train in Cleveland with Pittsburgh refiner O. T. Waring when Waring asked him who owned a handsome, dark green hillside house in the distance. “You wish to know who owns that house?” asked Rockefeller, suddenly very upset. “It’s our Mr. Hopper, who makes barrels for us. Whew! It’s an expensive house, isn’t it? I wonder if Hopper isn’t making altogether too much money? Let’s look into it.”11 Back in the office, he pored over the accounts, decided that Hopper’s profits were excessive, and terminated the contracts with him. In a similar vein, Rockefeller was concerned that if he advertised his own wealth through fancy houses, he might attract investors into the refining business and only worsen the excess capacity problem.
As will be seen, Rockefeller was capable of extraordinary ferocity in compelling submission from competitors. He might starve out obdurate firms by buying all available barrels on the market or monopolize local tank cars to paralyze their operations. Yet Rockefeller didn’t apply this pressure lightly and preferred patience and reason—if possible—to terror. He was not only purchasing refineries but assembling a managerial team. The creation of Standard Oil was often less a matter of stamping out competitors than of seducing them into cooperation. In general, Rockefeller was so eager to retain original management that he accumulated expensive deadwood on the payroll and, for the sake of intraempire harmony, preferred to be conciliatory. Several years later, one colleague wrote to him that almost the entire executive committee “have made up their minds that the policy of buying out our competitors has had its day and that to pay men salaries for doing nothing is poor business, though these men have been all their active business lives in the Oil business.”12 This policy, which kept colleagues from defecting and forming competing companies, was one of many expensive extravagances that accompanied the creation of the monopoly.
With access to Oil Creek via the Allegheny River, Pittsburgh was an optimal crossroads for oil traffic, and it was inevitably targeted by Rockefeller for his second great wave of consolidation. After the failed Pittsburgh Plan, Rockefeller hoped to prod, wheedle, and cajole both Pittsburgh and Philadelphia refiners into Standard Oil.
During the autumn of 1874, Rockefeller and Flagler attended a secret summit meeting in Saratoga Springs with their Pittsburgh and Philadelphia counterparts, Charles Lockhart and William G. Warden. By snapping up the strongest refiners in these two towns, Standard Oil hoped that it would then easily corral the smaller refiners in their wake. With its racetrack and gambling casino, Saratoga Springs was a fashionable resort for wealthy sportsmen and, as Commodore Vanderbilt’s summer home, a popular gathering spot for confidential business talks. After breakfast, the four refiners retreated to a pleasant pavilion by a spring, where they talked for six hours. Only by banding together in one firm, Rockefeller argued in his most soothing manner, could they avert destructive price-cutting. When Lockhart and Warden hesitated, Rockefeller played his trump card: He invited Warden to come to Cleveland and inspect the Standard Oil books. When Warden later examined them, he was taken aback: Rockefeller could manufacture kerosene so inexpensively that he could sell below Warden’s production costs and earn a profit. After several weeks of appraising Standard Oil and being assured of a voice in its management, Warden and Lockhart joined forces with Rockefeller. In the clandestine sale of their plants, they had the foresight to take payment in Standard Oil stock. Since Rockefeller’s papers from this period are sparse, we don’t know precisely why these powerful rivals yielded to him, but they were probably attracted by the access to railroad rebates, lower interest rates, scarce tank cars, and technical expertise that went along with the partnership.
With this decisive stroke, Rockefeller absorbed more than half of the Pittsburgh refining capacity, with the leading Philadelphia refinery tossed in for good measure. In this way, he activated a self-sustaining movement as his new allies agreed to consolidate business in their localities and supervise the purchase of the remaining independent refineries. A massive chain reaction was thus set in motion that rippled through both refining centers, with local businessmen now acting as Rockefeller’s agents. Of twenty-two Pittsburgh refiners in existence when Rockefeller struck his Saratoga Springs deal, only one was still in existence independently two years later.
Rockefeller was especially delighted to snare Charles Lockhart, a bearded Scot with a frosty, taciturn manner who was, in Rockefeller’s words, “one of the most experienced, self-contained, and self-controlled men in business.” 13 During the Saratoga meeting, he impressed the Standard men because he listened attentively but hardly breathed a syllable, which elicited Rockefeller’s highest praise: “That’s the kind of man I’d like to have go fishing with me.”14 Though the oil business was comparatively young, Lockhart was already a veteran, having sold Seneca Oil along with William Frew in a Pittsburgh store in the 1850s. Soon after Edwin Drake’s discovery, Lockhart had carried the first samples of Pennsylvania kerosene to London. Besides creating the top Pittsburgh refiner, Lockhart, Frew and Company, the two men had also joined forces with William Warden to establish a Philadelphia affiliate, Warden, Frew and Company, which later evolved into the Atlantic Refining Company. This innovative trio of refiners shipped oil to Liverpool aboard steamers lined with iron tanks, reducing both the risk of fire and the noisome smells. The antithesis of the penurious Lockhart, Warden was an effusive, bighearted man with a broad face and muttonchop whiskers. With wider-ranging interests than the average Standard Oil man, he was a former abolitionist who had donated money to black causes after the war, a conscientious Presbyterian, and an active reformer in Philadelphia politics.
While stepping up his Pittsburgh and Philadelphia campaigns, Rockefeller also established a critical foothold in New York, where he had already bought the Devoe Manufacturing Company, specialists in case oil, and the Long Island Company, operator of a large refinery. Through the efforts of brother William, Rockefeller now took over Charles Pratt and Company. A short man with a sandy beard, Charles Pratt was a self-made Baptist with the habitual reticence that Rockefeller prized. He had manufactured paints before the Civil War and this had led him into oil refining. With a flair for merchandising, he had made his high-quality kerosene, Astral Oil, a common fixture in American households and so adroitly managed exports to Europe and Asia that the brand acquired international fame.
In time, Charles Pratt felt slighted and pushed aside by Rockefeller, who sometimes admired his conservative style but generally mocked him as an old fogy lacking in vision. Quite unlike Warden and Lockhart, Pratt ended up on the losing side of many policy disputes with Rockefeller and took to writing him querulous letters laced with self-pity. During one squabble with Rockefeller in 1881, Pratt wrote petulantly, “I cannot see good in any effort of mine to influence you or others by any arguments.” 15
The undisclosed purchase of Charles Pratt’s firm brought into the Standard fold one of the most energetic, swaggering figures in its history: Henry H. Rogers, who had led the committee of New York refiners that indignantly contested the SIC. He was now one of the first turncoats who defected to the Standard camp, and Rockefeller gloated over such conquests. “I’m happy to state that in most cases the very men who were desperately opposed to anything the Standard Oil Company might suggest . . . when they met us face to face, when they came to know from us rather than from those maligners, they readily joined us and never had occasion to regret.”16 Though he later clashed with Rockefeller, Rogers was a versatile executive who directed, in turn, Standard’s crude-oil purchases, pipelines, and manufacturing operations. As petroleum by-products grew in importance, Rogers, with a technical grasp that exceeded Rockefeller’s, patented a landmark process for separating naphtha from crude oil.
No sooner had Standard Oil enlisted Charles Pratt than New York independents began to experience unaccountable shortages of vital supplies. John Ellis and Company, which manufactured petroleum jelly, sud
denly found it couldn’t book the requisite railroad cars for crude-oil shipments. Some invisible force was working against them. As the firm tried to unravel this mystery, a Standard Oil representative took the opportunity to drop by for a friendly chat with John Ellis and warned him, “You are helpless. You will have to sell out.” Appalled by this heavy-handed treatment, Ellis retorted, “I will never sell out to any company as crooked as the Standard Oil.”17 Ellis stayed independent, but few firms had the resources or fortitude to withstand the unceasing pressure exerted by the growing legions of Standard Oil minions.
In his lightning offensives in Pittsburgh, Philadelphia, and New York, Rockefeller was buying refineries in strategic railroad and shipping hubs, where he could negotiate excellent transportation rates. But despite its proximity to the wells, he never considered Oil Creek an economical place for refineries—which didn’t enhance his popularity in western Pennsylvania. Many ingredients used in refining—from sulfuric acid to glue to barrel hoops—cost more in that secluded area than in urban centers. By demoting the Oil Regions as a refining center, Rockefeller threatened the livelihood of thousands of people in Titusville, Franklin, and Oil City and offended their sense of justice. The locals were taught to believe, in Rockefeller’s words, that “the place where the oil was produced, gave certain rights and privileges that persons seeking to engage in other localities had no right to presume to share.”18 Rockefeller struck them as an evil interloper, a usurper of their birthright, when he was merely exercising his right to practice business where he pleased.
Nonetheless, to enforce an airtight monopoly, he needed to capture the Oil Creek refineries, if only to dismantle the least efficient ones. On January 22, 1874, he stunned local refiners by buying the Imperial Refining Company and its vast facility near Oil City. For local anti-Standard firebrands, it was a move laden with ominous symbolism. One of the consenting sellers was Captain Jacob J. Vandergrift, a husky little man with a Santa Claus beard. A former skipper on the Ohio River, Vandergrift was a wealthy, God-fearing temperance advocate who commanded universal power and respect. Along Oil Creek, his desertion to Standard Oil was considered treasonous betrayal, and it demoralized local independents—precisely what Rockefeller had wanted. In early 1875, Rockefeller captured the second largest Titusville refiner, Porter, More-land and Company, which brought twenty-seven-year-old John D. Archbold— the diminutive homilist who had electrified the crowd at the Titusville Opera House with his blazing oratory against the SIC—into the Standard Oil fold. Now, convinced that competition was a dated concept, Archbold suddenly enlisted under the banner of industrial consolidation.
Aside from Henry Flagler, Archbold was the most significant figure recruited by Rockefeller. Even before he set eyes on him, Rockefeller was intrigued. Registering at a Titusville hotel one day, he noted the signature above his own name: “John D. Archbold, $4 a barrel.” This cocky self-promotion impressed Rockefeller, for crude oil was selling at substantially below that price.19 Nine years younger than Rockefeller, the boyish Archbold was a short spark plug of a man, weighing about 130 pounds. The son of a Baptist circuit preacher who abandoned his family when John was ten (the prevalence of ministers’ sons at Standard Oil is striking), he had come to Titusville as a teenager and grown up with the industry. Quick-witted and optimistic, a jovial raconteur, he “laughed his way to a great fortune,” as one contemporary said.20 Though not easily charmed, Rockefeller was enchanted by Archbold’s high spirits, his inexhaustible fountain of jokes and stories; his short stature aside, he was the man at Standard Oil who most resembled Big Bill. Archbold became Rockefeller’s proxy, picked successor, surrogate son, and court jester. Before long, Rockefeller learned that this preacher’s son was overly fond of worldly pleasure and spent his nights drinking and playing poker. In time, Rockefeller forced him to repudiate alcohol, but even this only seemed to draw them closer together.
When Archbold went over to Standard Oil, he was denounced bitterly as a “renegade” and “deserter” and incurred special resentment from former admirers.21 He was such a deft, good-natured diplomat, however, that Rockefeller assigned him to absorb the Oil Creek refiners. In no other place did Rockefeller so sorely need an attractive substitute. Around Titusville, Standard Oil was reviled as the “octopus,” and Rockefeller was regarded as a monster. Mothers scolded their children by saying, “Run, children, or Rockefeller’ll get you!”22 As a result, the original Standard Oil officials never conducted buyout talks directly but operated through “acquaintances, competitors, and friends of the competitive refiners, best calculated to explain to them the situation, best fitted to succeed in the negotiations because of their intimate acquaintance, kindly relations and the mutual confidence of neighbors and friends.”23 Archbold was the smiling face who mollified enemies and restored peace, and with his advent Rockefeller no longer needed to go to Oil Creek.
In September 1875, Standard Oil formed the Acme Oil Company, a front organization to take over local refiners under Archbold’s guidance. Within months, he had bought or leased twenty-seven refineries, moving at such a hectic pace that he nearly drove himself to collapse. Over the next three or four years, Archbold herded the remaining independents into Standard Oil. Several letters from Archbold to Rockefeller confirm the latter’s contention that he paid fairly for refiners. After grudgingly paying an exorbitant $12,000 for one refinery, Archbold told Rockefeller, “We have the feeling that it is a large price for the property and do not doubt but that if we could hold out for a time on the present low basis we might do better, but whether the difference is worth the ammunition is a question.”24 Once the purchase was settled, he added, “I found it a very difficult trade to make, & was compelled to make some concessions to the parties that I disliked very much to make regarding which I will explain to you more fully when I see you.”25 Though independent refiners often felt squeezed by Rockefeller, he didn’t always exploit their vulnerability to the maximum possible extent and sometimes even showed leniency.
At least one prominent refiner contended that he was subjected to coercion by Standard Oil when he tried to build a new refinery. Samuel Van Syckel, the pipeline pioneer, said a Standard Oil representative had offered him a good salary to abandon the project. “He then said that I could make no money if I did refine oil. He also said if I did I could not ship it. He said he would say to me confidentially that they had made such arrangements with the railroads in reference to freight—in reference to getting cars—he knew I could make no money if I did make oil.”26 Van Syckel bowed to superior force.
In May 1875, Rockefeller completed his grand design of controlling all the major refining centers when he covertly bought J. N. Camden and Company of Parkersburg, West Virginia, and rechristened it the Camden Consolidated Oil Company. Camden’s correspondence documents the stealth involved in this sort of takeover. Before consummating the sale, Standard Oil requested a minute inventory of his properties and was ready to send its expert superintendent, Ambrose McGregor, to investigate. Yet Johnson Newlon Camden himself, a well-known Democratic politician, feared that the superintendent of his barrel factory might recognize McGregor and warned Standard Oil, “We would prefer having him to come here, but don’t see how he could do it without exposing the whole thing. I find the Superintendent of the Barrel Factory is a little curious about what is going on.”27 That even a superintendent was kept in the dark about the new owners underscores the priority that Standard Oil placed on confidentiality.
The Camden deal remedied a flagrant weakness for Rockefeller, who dominated refineries in the areas served by the New York Central, the Erie, and the Pennsylvania Railroads. There was only one gaping hole left in the map: the territory controlled by the maverick Baltimore and Ohio (B&O) Railroad, whose tracks spanned southern Pennsylvania, connecting a cluster of refineries in Parkersburg and Wheeling, West Virginia, with an oil-export center in Baltimore. Even more intolerable for Rockefeller, the upstart B&O dared to handle crude oil shipped to Pittsburgh through a p
ipeline called the Columbia Conduit Company, which had defied Standard Oil at every turn. In short, the B&O was providing comfort to the last independent refiners still holding out in open rebellion against his imperial rule.
The president of the B&O, John W. Garrett, had long exhorted Camden to fight the Standard Goliath and offered him marked-down freight rates to do so. Now that he had—unbeknownst to Garrett—defected to Rockefeller, Camden wanted to retain the rates expressly designed to shore up Standard Oil opponents. On May 12, 1875, scarcely able to suppress his mischievous glee, Camden informed his new owners in Cleveland, “Mr. Garrett . . . is coming out to see us tomorrow. I suppose he will encourage us to keep up our oil business and fight the ‘combination’ ”—that is, Standard Oil.28 And he negotiated excellent rates with Garrett. In exchange for shipping fifty thousand barrels of oil monthly, he would receive a ten-cent-a-barrel drawback on all refined oil sent via the B&O—whether shipped by Camden or by his competitors. That Garrett revived the infamous drawback when he thought he was fighting Standard Oil shows that nobody could claim exclusive virtue in this business.
That spring, Rockefeller gave Camden wide leeway to buy up refiners serviced by the B&O, and he quickly snatched up three Parkersburg refiners. At several points, Camden, like Archbold, bristled at the excessive prices he paid. “It almost makes me weepy to pay out good money for this kind of junk,” he told Rockefeller, “but as it is a part of our duty to mankind, I suppose it is necessary to carry it through without flinching.”29 The completion of the Baltimore campaign left John D. Rockefeller, still in his thirties, the sole master of American oil refining. Since no major crude-oil deposits had been unearthed beyond western Pennsylvania—Russia, perhaps, being the lone exception—it also meant that he monopolized the world kerosene market. He was now living a fantasy of extravagant wealth that would have dwarfed the most febrile daydreams of William Avery Rockefeller. And few people beyond the oil business had ever even heard of him.