Titan
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We must retire one common canard about Rockefeller: He didn’t set crude-oil prices through blanket edicts. In his correspondence, one sees the oil king trying to guess the trend of crude prices and bemoaning speculation. As he told one of his personal financial advisers in 1882, crude oil “is about the worst commodity in the world to speculate in. . . . It is about as uncertain as railroad stocks.”49 Perhaps the chief way that Standard Oil influenced crude prices was by elevating or dropping storage charges at its pipelines, which the firm sometimes used to break speculative raids. By issuing certificates against oil stored by its pipelines, it stimulated a free market in crude oil, and hundreds of thousands of people speculated in or borrowed against these certificates, creating the first oil-futures market and setting the trend for spot prices. After the National Petroleum Exchange opened in Manhattan in late 1882, the speculators far outweighed the trust in importance in pegging prices.
As Rockefeller boasted, Standard Oil was an infallible moneymaker. In the late 1880s, Henry M. Flagler testified it had average earnings of 13 percent a year on net assets, which considerably understated its performance. When Teddy Roosevelt’s Bureau of Corporations later examined the matter, it computed a more handsome 19 percent return from 1882 to 1896. Rockefeller defended these high returns as justified by the fear that the oil might run dry and render the trust’s vast investment worthless. He knew public opinion was inflamed by the exorbitant dividends declared on Standard Oil shares, which sometimes ran as high as 200 percent. These figures were misleading, Rockefeller argued, since Standard Oil’s actual capital was typically ten times its official capitalization. In terms of real capital, the 200 percent dividend declared in January 1885 was more like 20 percent—extremely high but not astronomical. Such a rich but not altogether outrageous return was just what the politic Rockefeller wanted.
Rockefeller knew that if he got greedy, other products could be substituted for kerosene, and this, too, curbed his appetite for excess profits. Oil was just one of many fossil fuels and kerosene one of many potential illuminants. In the fall of 1878, America’s wunderkind, Thomas Alva Edison, boasted to reporters at Menlo Park, New Jersey, that he had dreamed up a practical electric lightbulb; within a year, he had created a miraculous bulb that glowed brightly for one hundred straight hours and directly threatened Rockefeller’s kerosene business. The new Edison Electric Light Company enlisted affluent bankers, including the august Drexel, Morgan and Company. On September 4, 1882, Edison stood in J. P. Morgan’s offices at 23 Wall Street and threw a switch that brightened Morgan’s office with electric lighting, inaugurating a generating plant in lower Manhattan. Luckily for Rockefeller, the lightbulb didn’t instantly drive out kerosene: It took time for Edison to cover the country with power stations, and by 1885 only 250,000 lightbulbs shone across America.
Instead of electric light, the soft, shimmering glow of gaslight began illuminating many American cities in the 1880s. For a long time, natural gas had been discarded by oilmen as a waste product until a business group led by J. N. Pew piped natural gas to Pittsburgh in 1883. Quick to perceive that natural gas complemented the oil business, Rockefeller advised Daniel O’Day that Standard Oil should develop its own strength in this area rather than turning to outsiders. O’Day and his ebullient team assured Rockefeller that they could pipe explosive gas long distances without mishaps. Within two years, they were piping gas from western Pennsylvania to cities in Ohio and New York, and by the late 1890s Rockefeller secretly oversaw natural-gas companies in Titusville, Oil City, Buffalo, and thirteen other localities. As one newspaper said, “Consumers in some of these places would be surprised to learn that they are burning Standard Oil gas.”50
To counter competition from gaslight, Edison based his promotional scheme upon a moral and aesthetic contrast between good electric light and evil gaslight. Of the flickering gaslight that later generations found so enchantingly poetic, he sneered, “It is a nasty, yellow light, too, and far removed from the color of the lovely natural light,” while he touted the “soft radiance” of electric lights as “singularly powerful and even . . . perfectly steady.” 51 With a persistence worthy of Standard Oil’s crusaders, Edison sales agents approached customers using “outmoded” gas jets and urged them to switch to advanced electric lamps.
The promotion of natural gas involved Rockefeller in sanguinary battles, for the major customers were municipalities, and the decisions were always highly political. The natural-gas business fed rampant corruption, a veritable cornucopia of graft, as companies manipulated urban officials to get these franchises. Though Rockefeller regularly denied knowledge of such machinations, his papers tell a different story: He exercised a supervisory role and knew all about the money funneled to politicians. In securing the Detroit franchise, Standard Oil furnished an emissary, G. A. Shelby, with $15,000 in cash and $10,000 in gas stock to sway politicians. When payment came tardily, Shelby groused to Rockefeller: “Will you guarantee the amount stated if Ordinance passes and is approved by the Mayor. . . . I have been to considerable expense and want to be sure of prompt settlement when work is completed.”52
In the natural-gas battles, the porous boundaries between politics and business began to crumble and disappear. In 1886, Daniel O’Day met behind closed doors in Philadelphia with the rival Columbia Natural Gas Company and fairly gasped at the political luminaries who were represented. As he told Rockefeller, “I was astonished to learn the people who are in it. All of the Republican local politicians of Philadelphia are stockholders. They are very much afraid of their investment, and feel now that unless they make some alliance with us that they will in all probability lose all their money, or a great share of it.” From pure expediency, O’Day favored a deal with their rivals, telling Rockefeller, “The feeling generally was to push the co. to the wall, a feeling in which I would fully share, were it not for the fact that the stockholders of the company might be very bad enemies to have in the Penna. legislature next winter.”53 Unconvinced by such pragmatic reasoning, the executive committee overruled Day.
The most bitter natural-gas fracas erupted in Toledo, Ohio, where the former governor, Charles Foster, was an old boyhood friend of Flagler and a recipient of Standard Oil campaign largesse. In July 1886, O’Day reported to Flagler that the ex-governor had agreed to merge his Fostoria Illuminating Gas Company with the Standard’s Toledo gas start-up to form the Northwestern Ohio Natural Gas Company. O’Day relayed the secret terms of this arrangement: “That Gov. Foster be President of the Co. But that we would have full control of management.”54 Toledo citizens were delighted when the Eastern Ohio Natural Gas Company decided to vie with Northwestern for a gas franchise; in a compromise settlement, both companies received franchises. Then it surfaced that both rival companies were controlled by Standard Oil, and in the ensuing brouhaha city officials decided, in retaliation, to erect their own municipal gasworks. Politicians in the Gilded Age tended to dispense with euphemisms, preferring cash on the barrelhead. Having done Standard Oil’s bidding in the gas business, Foster demanded his payoff from Rockefeller in January 1888, saying his campaign committee had a debt of almost $1,200. “My suggestion to you,” he told Rockefeller bluntly, “is that you send me a cheque for this amount. . . . I have refused to ask you or your people for contributions for several years past. In this case I did it because I know that you feel an interest with us, and for the further reason that I thought it would be helpful in warding off the blows made at you, and at our Gas Co.”55 In reply, Rockefeller sent Foster a thousand dollars, though he couldn’t resist appending some barbed comments on his past performance. “Our friends do feel that we have not received fair treatment from the Republican Party, but we expect better things in the future.”56
In 1886, Standard Oil set up the Natural Gas Trust, with Rockefeller as its largest shareholder. As such, he presided over these sordid municipal skirmishes, albeit keeping a sanitary distance. He followed matters closely but never soiled his hands, so that he could pr
ofess ignorance of the whole matter.
If Rockefeller tried to deny responsibility for his more deplorable actions, he had legions of critics who loudly proclaimed that he had maliciously ruined them. As Ida Tarbell noted, his foes endowed him with superhuman powers. “Strange as the statement may appear, there is no disputing that by 1884 the Oil Regions as a whole looked on Mr. Rockefeller with superstitious awe.”57 Each day’s mailbag brought more invective from total strangers who cursed him and pleaded for relief. The most bile flowed from western Pennsylvania oilmen who believed that he capriciously decreed crude-oil prices each morning. As one Bradford producer told him, “The situation here is truly alarming and hundreds of families are in actual distress that need not be if the price of oil was what thousands believe you could make it.”58 Another correspondent warned him, “There are thousands here on the verge of financial ruin on account of the low price obtained for their product, and if it is within your power to give them a better price you would bestow a boon inestimable in its value to this entire country. ”59 Sometimes these malcontents seemed torn over whether Rockefeller was Satan or Santa Claus, as shown by this muddled query from P. O. Laughner:
I am a poor devil of a pyker on the oil market and have been in the business for eight years. During all this time I have been cursing the Standard Oil Company with the rest of the boys—curses loud and deep. But with all the anathemas hurled at it the S.O.C. is still in existence and continues to pile up enormous wealth. Now as the market is completely dead and my occupation gone, I have come to the conclusion that it would be wisdom to stop cursing the Standard and strike it for a good fat position.60
After his scandal-ridden childhood with Big Bill, Rockefeller had a fine instinct for enemies and was sensitive to this crescendo of criticism. When out for a walk, he was vigilant and preternaturally aware of anyone following him; it was impossible to sneak up behind him. Yet he lent no credence to his critics and regarded their putative idealism as a flimsy cover for selfish motives. Rockefeller saw himself stoically suffering the fate of all revolutionary figures. “The ideas on which we worked were new . . . ,” he explained. “But knowing that we were right, we went steadily about our business, founded on ideas that were an irresistible force.” 61 He identified many critics as competing refiners who had foolishly taken cash instead of Standard Oil stock for their plants. His melodramatic rendition of it was this: “We think about Hades. What more can punish a man than to sit and groan as he contemplates what might have been!” 62
Despite being the target of so much public obloquy, Rockefeller seemed fearless. “The word ‘fear’ is not found in my father’s vocabulary,” his son once said, “nor does he know what the sensation is.” 63 Junior recalled being driven to a train station in Manhattan by his father at a time when he was swamped by anarchist threats. Though Junior begged him to hire bodyguards, his father scoffed:
“Why John,” he said, “I can protect myself. If any man should be foolish enough to attack me—well.” . . . He did not boast. I have never heard him boast. But he stood up full height with his fists clenched. What he said was to the effect that if anyone should attack him he was feeling sturdy—and he hoped he wouldn’t hurt the poor fellow too much.64
Junior remembered the evening in Cleveland years earlier when a maid shrieked that a burglar was upstairs. Rockefeller unhesitatingly seized a pistol and strode to the back door, hoping to nab the burglar, who had already slipped down a post and escaped.
Rockefeller professed that he bore no malice toward critics and approached them in a spirit of Christian tolerance—so long as they conceded their error. To those “who repented their attacks and abuse we freely extended forgiveness, as we ourselves might hope for mercy and forgiveness from a higher source,” he said.65 As his private life and philanthropy attest, he was not a cruel man and did not have sadistic impulses. Yet he countered critics with ad hominem attacks and frequently referred to their actions as schemes, implying something devious and illegitimate. Whenever he was about to commit some particularly heinous act, he first found a character flaw in the victim then proceeded with a serene conscience.
Proof against criticism, Rockefeller nonetheless provoked a small army of gadflies. Perhaps the most picturesque was Lewis Emery, Jr., the rich Bradford producer and pipeline owner and a Pennsylvania legislator, who served as a major source for Ida Tarbell. If only Rockefeller had played fair, Emery insisted, he would have ended up the more powerful oilman. “I had and have as much brains as John D. Rockefeller, but I have never had his cunning nor his ability to use unscrupulous means or unscrupulous men to carry out a programme,” he maintained.66 Though he spent much of his life stalking the titan, he never actually met Rockefeller, who was, he explained, “too much in the background, too cunning.” 67
Standard Oil applied merciless measures to stop Emery’s pipelines from linking up with railroads, as shown with his Equitable pipeline to Buffalo. In 1892, Emery was about to complete a major pipeline to Hancock, New York, where he expected the Ontario and Western Railroad to pick up his oil and transport it to New York City. When Archbold got wind of this, he demanded a showdown with the railroad. His report to Rockefeller shows the lengths that Standard Oil would go to cripple a competitor:
We have had further interviews with the Ontario & Western people, and feel that we have made some progress toward a possible understanding with them. It is now entirely sure that there has been no definite engagement entered into by them with the Emery party, and we think they are now convinced that the rates they had been talking about with the Emery party are absurdly low, and that business on any such basis would be undesirable and unprofitable. We have made them a proposition of business covering a period of five years, and expect an answer from them this week. Our proposition is that we put over their lines 400,000 barrels of oil yearly, or, in default of any part of the amount, pay a penalty of 10 per cent of the existing rates. We think it a very liberal proposition to them.68
Standard Oil was not content to advance its own interest; it worked actively to damage the business interests of its adversaries. Rockefeller’s papers also reveal that Emery was prepared, at one point, to sell his oil properties to Standard Oil, asking for $750,000 in shares of the trust—hypocrisy that only validated Rockefeller’s dim opinion of his critics.
Another embittered foe was George Rice, a Vermont native and independent refiner from Marietta, Ohio. A vigorous man with a bulldog face, Rice thrived on crossing swords with the oil trust. More than anyone else, Rice was driven mad by Standard Oil’s unjust methods and became a professional Rockefeller hater. He instigated many legislative probes of Standard Oil and in 1881 published a pamphlet entitled Black Death, an anthology of scathing newspaper exposés. For Rockefeller, Rice was nothing but a blackmailer. “He liked to harass, embarrass, annoy the Standard Oil interests with a view of enabling him to sell his quite unimportant refinery interest. . . . This is the whole story of George Rice.”69 In fairness to Rockefeller, Rice tried repeatedly to extort money from him, asking an outrageous $250,000 for a refinery Rockefeller valued at only $25,000. To banish this pest, Rockefeller and his colleagues alternated between trying to buy him out and trying to bludgeon him to death. As Colonel Thompson reported to Rockefeller, “[Rice] admitted that it could be better to occupy friendly relations with us and assumed to be willing to make some arrangement, but extortion was written in every lineament of his countenance and burdened every syllable that fell from his lips.”70 At the time, Rice was lobbying for a federal investigation of Standard Oil’s railroad rebates.
Though Rice insisted that Standard Oil laid deep plots against him, Rockefeller mocked his criticism as the ravings of an overactive mind. “We might as well assume that the Standard Oil Company would get a 21-inch cannon to shoot mosquitoes.”71 Yet his files show that such a cannonade was fired at Rice. In 1885, Daniel O’Day struck a deal with the Cleveland and Marietta Railroad, which was the lifeline of Rice’s refinery. The railroad agreed to c
harge Standard Oil 10 cents a barrel versus 35 cents for Rice and his fellow independents. Resurrecting the infamous drawback, Standard would also be paid 25 cents for every barrel that Rice shipped. In dictating this deal, O’Day bluntly warned the railroad that if it didn’t comply, he would build a competing pipeline and drive them out of business. In a rare successful suit against the trust, Rice forced Standard Oil to repudiate the nefarious contract and refund him $250.
With his own brand of courage, Rice tried to market oil against the two roughest Standard Oil subsidiaries, Chess, Carley and Waters-Pierce. As soon as Rockefeller got reports of even minuscule shipments made by Rice, Standard Oil agents in the affected states were told to thwart him by any means necessary. In 1885, W. H. Tilford told Rockefeller, “As far as Chess, Carley Co.’s territory is concerned, every effort is being made to dislodge Rice. Travelling men are being put upon the road, who go from station to station selling oil in competition with any oil which Rice may have in the various towns.” 72 Every time Rice was ejected from another hamlet, Rockefeller was informed. “We have recently driven Rice entirely out of Anniston, Alabama, and feel that we shall soon have him also out of Birmingham,” the Chess, Carley treasurer reported to Tilford. “Wherever this result is accomplished, however, it has only been by our making very low prices, frequently at a loss to this company, and such loss continued through a long period.”73 No threat to his empire was too small for Rockefeller to overlook.
If Emery, Rice, and other anti-Rockefeller mavericks made little headway in the oil industry itself, they were destined to have a powerful impact in the court of public opinion as they coalesced into an influential lobbying group. They formed a ready source of information for journalists, of whom their first polemical champion was a rich, elegant newspaperman named Henry Demarest Lloyd. The son of a Dutch Reformed minister, Lloyd attended Columbia College, passed the New York bar, then married into the wealthy Bross family, co-owners of the Chicago Tribune. Starting in 1878, Lloyd wrote withering editorials about Standard Oil in a florid style that captured the public’s imagination. He profited from the flood of revelations produced by the Hepburn hearings in New York and the Pennsylvania lawsuits against Rockefeller. In the March 1881 issue of the Atlantic Monthly, editor William Dean Howells published Lloyd’s mordant account of Standard Oil entitled “Story of a Great Monopoly.” The first serious exposé of the trust in a prestigious, mass-circulation magazine, Lloyd’s seminal article was a sensation, and the issue went through six printings.