John D. Rockefeller's Oil Fortune

Until the late 1850s, oil had been really an annoyance, to most people. People would dig water wells and if they happened to strike oil, they would curse their bad luck. But with the development of rail-roads, and with the industrial revolution, for the first time people began seeking oil.

H.W Brands, University of Texas

In 1859, the new resource, petroleum, is produced commercially for the first time, at Oil Creek, Pennsylvania.

ROCKEFELLER
Like many robber barons, John D Rockefeller evades fighting in the Civil War by paying $300 to a substitute to fight for him.

John D Rockefeller started as a bookkeeper in Cleveland, became a merchant, accumulated money, and decided that in the new industry of oil, he who controlled the oil refineries controlled the industry. He bought his first in 1862 Howard Zinn

At first, oil bosses attempt a 'pool' arrangement, dividing their markets equally. But cartel members cheat each other so regularly, the system falls apart. In 1870, Rockefeller merges his five refineries to create Standard Oil Company. He eliminates competition by two methods. Aggressive, some consider unethical, business practices and 'Trusts'. Firstly, he makes secret agreements with the rail-roads to ship his oil in return for discounts and then uses the 1873 recession to wipe out his competitors. Secondly, Rockefeller's lawyers come up with the infamous 'trust' solution.

Holders of stock in the various oil companies handed over their shares to Rockefeller and his associates acting as a board of trustees; in return they got 'trust' certificates which paid dividends but gave no power Hugh Brogan

It's so successful an arrangement that by 1898 the Standard trust refines 83.7% of all oil produced in the US.

By 1899 Rockefeller's fortune is estimated at $200m. At his peak, he sits on the board of 37 corporations. He is considered the worst, which in the era of the robber barons is saying something, of all the monopolists. Privately, he doesn't care though publicly, he hires a public relations man 'to proclaim his virtues'.

Did you know?

While some multimillionaires robber barons started in poverty, most did not. A study of the origins of 303 textile, railroad and steel executives of the 1870s showed that 90% came from middle or upper class families. Howard Zimm: A People's History of the USA, A saying of that age is an honest man (voter of politician) is defined as one who, when bought, stays bought.