Editing Standard Oil (section)

==Founding and early years==
[[File:John D Rockefeller 1872.png|thumb|left|150px|[[John D. Rockefeller]] {{circa|1872}}, shortly after founding Standard Oil]]
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 (chemist)|Samuel Andrews]], silent partner [[Stephen V. Harkness]], and [[Oliver Burr Jennings]], who had married the sister of William Rockefeller's wife.<ref name=":0">{{Cite book |last=Snodgrass |first=Mary Ellen |title=The Civil War Era and Reconstruction: An Encyclopedia of Social, Political, Cultural and Economic History (Volumes 1–2) |publisher=Routledge |year=2015 |isbn=978-1-317-45791-6 |location=Oxon |pages=573 |language=en}}</ref> In 1870, Rockefeller abolished the partnership and incorporated Standard Oil in Ohio. The company was established with $1 million in capital.<ref name=":0" /> 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.<ref name="njurJ" /> Rockefeller chose the "Standard Oil" name as a symbol of the reliable "standards" of quality and service that he envisioned for the nascent oil industry.<ref name="05Rgi" />

[[File:Standard Oil Articles of Incorporation - 1870.png|thumb|Standard Oil Articles of Incorporation signed by John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, and William Rockefeller, 1870]]
[[File:Standard Oil Company 1878.JPG|thumb|Share of the Standard Oil Company, issued May 1, 1878<ref name="Udo Hielscher p. 68 - 74" />]]
[[File:Standard Oil Trust 1883.JPG|thumb|Share of the Standard Oil Trust, issued January 18, 1883<ref name="Udo Hielscher p. 68 - 74" />]]
In the early years, John D. Rockefeller dominated the combine; he was the single most important figure in shaping the new oil industry.<ref name="Yergin_The_Prize_1991" /> He quickly distributed power and the tasks of policy formation to a system of committees, but always remained the largest [[shareholder]]. Authority was centralized in the company's main office in Cleveland, but decisions in the office were made cooperatively.<ref name="sG0Ho" />

[[Image:Standard Oil.jpg|thumb|right|Standard Oil Refinery No. 1 in [[Cleveland, Ohio]], 1897]]

The company grew by increasing sales and through acquisitions. After purchasing competing firms, Rockefeller shut down those he believed to be inefficient and kept the others. In a seminal deal, in 1868, the Lake Shore Railroad, a part of the [[New York Central]], gave Rockefeller's firm a going rate of one cent a gallon or forty-two cents a 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.<ref>{{Cite book |last=Morse |first=Eric Robert |title=Juggernaut: Why the System Cushes the Only People Who Can Save It |publisher=New Classic Books |year=2010 |isbn=978-1-60020-049-6 |pages=260 |language=en}}</ref> Smaller companies decried such deals as unfair because they were not producing enough oil to qualify for discounts.

Standard's actions and secret transport deals helped its [[kerosene]] price to drop from 58 to 26 cents from 1865 to 1870.<ref name="Nhew6" /> Rockefeller used the [[Erie Canal]] as a cheap alternative form of transportation—in the summer months when it was not frozen—to ship his refined oil from Cleveland to the industrialized Northeast. In the winter months, his only options were the three trunk lines—the [[Erie Railroad]] and the [[New York Central Railroad]] to New York City, and the [[Pennsylvania Railroad]] to Pittsburgh and Philadelphia.<ref name="HNaUa" />

Competitors disliked the company's business practices, but consumers liked the lower prices. Standard Oil, being formed well before the discovery of the [[Spindletop]] oil field (in Texas, far from Standard Oil's base in the Midwest) and a demand for oil other than for heat and light, was well placed to control the growth of the oil business. The company was perceived to own and control all aspects of the trade.

===South Improvement Company===
In 1872, Rockefeller joined the [[South Improvement Company|South Improvement Co.]] which would have allowed him to receive rebates for shipping and drawbacks on oil his competitors shipped. He successfully convinced refineries in Cleveland to sell their businesses to Standard Oil in exchange for cash or stock.<ref>{{Cite book |last=Tarbell |first=Ida M. |title=The History of the Standard Oil Company ( 2 Volumes in 1) |publisher=Cosimo, Inc. |year=2010 |isbn=978-1-61640-399-7 |location=New York, NY |pages=63 |language=en}}</ref> But when this deal became known, competitors convinced the [[Pennsylvania Legislature]] to revoke South Improvement's charter. No oil was ever shipped under this arrangement.<ref name="A3mht" /> Using highly effective tactics, later widely criticized, it absorbed or destroyed most of its competition in [[Cleveland]] in less than two months{{how|date=September 2017}} and later throughout the northeastern United States.

===Hepburn Committee===
[[A. Barton Hepburn]] was directed by the [[New York State Legislature]] in 1879, to [[The Hepburn Committee|investigate the railroads' practice of giving rebates to their largest clients within the state]].<ref>{{cite web |url = https://archive.org/details/cu31924022800019/page/n5/mode/2up?view=theater |title = Proceedings of the Special Committee on Railroads, Appointed under a resolution of the Assembly to investigate alleged abuses in the Management of Railroads chartered by the State of New York (Vol. I, 1879) |author = <!--Not stated--> |date = 1879 |via = Internet Archive |publisher = New York State Legislature |access-date = February 11, 2022 |quote = Resolved, That a special Committee of five [afterwards increased to nine] persons be appointed, with power to send for persons and papers, and to employ a stenographer, whose duty it shall be to investigate the abuses alleged to exist in the management of the railroads chartered by this State, and to inquire into and report concerning their powers, contracts and obligations; said Committee to take testimony in the city of New York, and such other places as they may deem necessary, and to report to the Legislature, either at the present or the next session, by bill or otherwise, what, if any, legislation is necessary to protect and extend the commercial and industrial interests of the State. Composed of Messrs. HEPBURN, HUSTED, DUGUID, LOW, GRADY, NOYES, WADSWORTH, TERRY and BAKER, met at the Capitol in the City of Albany on Wednesday March 26th, 1879, at 3 o'clock P. M., and was called to order by the Chairman. }}</ref> Merchants without ties to the oil industry had pressed for the hearings. Prior to the committee's investigation, few knew of the size of Standard Oil's control and influence on seemingly unaffiliated oil refineries and pipelines—Hawke (1980) cites that only a dozen or so within Standard Oil knew the extent of company operations.<ref name="ul6uO" />

The committee counsel, [[Simon Sterne]], questioned representatives from the Erie Railroad and the New York Central Railroad and discovered that at least half of their long-haul traffic granted rebates and much of this traffic came from Standard Oil. Even independent companies not allied with Standard Oil confirmed receiving these rebates such as Simon Bernheimner, who was once a partner of the Olefin Oil Company.<ref>{{Cite book |last1=Olien |first1=Roger M. |title=Oil and Ideology: The Cultural Creation of the American Petroleum Industry |last2=Hinton |first2=Diana Davids |last3=Olien |first3=Diana Davids |date=2000 |publisher=University of North Carolina Press |isbn=0-8078-2523-9 |location=Chapel Hill, NC |pages=62 |language=en}}</ref> The committee then shifted its focus to Standard Oil's operations. [[John Dustin Archbold]], as president of Acme Oil Company, denied that Acme was associated with Standard Oil. He then admitted to being a director of Standard Oil.<ref name="ul6uO" />

The committee's final report scolded the railroads for their rebate policies and cited Standard Oil as an example. This scolding was largely moot to Standard Oil's interests since long-distance oil pipelines were now their preferred method of transportation.<ref name="ul6uO" />

===Standard Oil Trust===
In response to state laws that had the result of limiting the scale of companies, Rockefeller and his associates developed innovative ways of organizing to effectively manage their fast-growing enterprise. On January 2, 1882,<ref name="Exep5" /> they combined their disparate companies, spread across dozens of states, under a single group of trustees. By a secret agreement, the existing 37 stockholders conveyed their shares "in trust" to nine trustees:<ref name="N6uX2" /> John and William Rockefeller, [[Oliver Hazard Payne|Oliver H. Payne]], [[Charles Pratt]], [[Henry Flagler]], [[John Dustin Archbold|John D. Archbold]], William G. Warden, [[Jabez A. Bostwick|Jabez Bostwick]], and [[Benjamin Brewster (financier)|Benjamin Brewster]].<ref name="qeb6w" />

"Whereas some state legislatures imposed special taxes on out-of-state corporations doing business in their states, other legislatures forbade corporations in their state from holding the stock of companies based elsewhere. (Legislators established such restrictions in the hope that they would force successful companies to incorporate—and thus pay taxes—in their state.)"
<ref>{{cite book |last = Armentano |first = Dominick |title = Antitrust and Monopoly: Anatomy of a Policy Failure |location = Oakland, CA |publisher = The Independent Institute |date = 1999 |pages = 64–65 }}</ref><ref>{{cite magazine |last1 = Daniels |first1 = Eric |title = Antitrust with a Vengeance: The Obama Administration's Anti-Business Cudgel |magazine = The Objective Standard |volume = 14 |issue = 4 |pages = 84–85 |publisher = Glen Allen Press |date = Winter 2009 |url = https://theobjectivestandard.com/2009/11/obama-antitrust/#_edn2 }}</ref>
Standard Oil's organizational concept proved so successful that other giant enterprises adopted this "trust" form.

By 1882, Rockefeller's top aide was [[John Dustin Archbold]], whom he left in control after disengaging from business to concentrate on philanthropy after 1896. Other notable principals of the company include Henry Flagler, developer of the [[Florida East Coast Railway]] and resort cities, and [[Henry H. Rogers]], who built the [[Virginian Railway]].

In 1885, Standard Oil of Ohio moved its headquarters from [[Cleveland]]  to its permanent headquarters at [[26 Broadway]] in [[New York City]]. Concurrently, the trustees of Standard Oil of Ohio chartered the Standard Oil Co. of New Jersey (SOCNJ) to take advantage of New Jersey's more lenient corporate stock ownership laws.

===Sherman Antitrust Act of 1890===
In 1890, [[Congress of the United States|Congress]] overwhelmingly passed the [[Sherman Antitrust Act]] (Senate 51–1; House 242–0), a source of American anti-monopoly laws. The law forbade every contract, scheme, deal, or conspiracy to restrain trade, though the phrase "restraint of trade" remained subjective. The Standard Oil group quickly attracted attention from [[antitrust]] authorities leading to a lawsuit filed by [[Ohio Attorney General]] [[David K. Watson]].

===Earnings and dividends===
From 1882 to 1906, Standard paid out $548,436,000 ({{Inflation|index=US-GDP|value=548436000|start_year=1906|r=-5|fmt=eq}}) in [[dividend]]s at a 65.4% [[payout ratio]]. The total net earnings from 1882 to 1906 amounted to $838,783,800 ({{Inflation|index=US-GDP|value=838783800|start_year=1906|r=-5|fmt=eq}}), exceeding the dividends by $290,347,800, which was used for plant expansions.