The Prize: The Epic Quest for Oil, Money, and Power

Introduction

The story of global oil, starting in Western Pennsylvania in 1859.
Filled with characters, ambitions, rivalries, and turning points in world events.
About oil's role in international politics, war, peace, the global economy, and the modern corporation.
Explores the hydrocarbon society and its impact on everyday life.
Focuses on the balance between modern life, economic growth, population, geopolitical turmoil, and environmental concerns.
Examines oil's role in the 21st century in the quest for oil, money, and power.

Ida M. Tarbell's Investigation

Ida Tarbell, a journalist, investigates John D. Rockefeller.
Rockefeller: the richest and most powerful man in America, creator of the Standard Oil Trust.
Symbol of monopoly and one of the most hated men in the country.
Tarbell meets researcher John Sittle in Cleveland.
First time she has set eyes on Rockefeller.

John D. Rockefeller

Richest man in America.
Created the Standard Oil Trust.
Symbol of monopoly.
Tried to be secretive and invisible.
Made a powerful impression.
His face showed age, sadness, and the cost of his success.

Challenges Faced by Ida Tarbell

People were scared to talk to her.
Feared selling out to the oil industry or facing retribution.
Even her father warned her about the dangers.
Her work had a dramatic and far-reaching impact on the oil industry.

Birth of the Oil Industry

Oil Creek in Western Pennsylvania: petroleum oil would seep to its surface.
Seneca Indians used it for war paint and to caulk their canoes.
Petroleum had no commercial value until the coming of the white man.
Before 1859: petroleum, rock oil, Seneca oil.
Used as snake oil and for medicinal purposes (e.g., treating burns, open sores, rheumatism, fevers).

The Rise of Kerosene

Oil could be refined into kerosene for illumination.
New source of illumination needed, as whale oil became too expensive.
1854: Samples of rock oil tested and found suitable for first-class kerosene.
East Coast Investors hired Colonel Edwin Drake in 1857 to explore for oil in Titusville.

Colonel Edwin Drake

Not qualified as an oil explorer.
Retired railway conductor with a pass.
Used salt boring techniques.
Locals were skeptical.
Money ran short; backers grew impatient.
Hired William Smith (Uncle Billy), a former blacksmith.
Drake used a pipe as they drilled, a forerunner of modern casing.
$08/28/1859$ : Oil bubbled up.
First oil sold for $40$ a barrel.

The First Oil Well

Uncle Billy struck oil at $04:00$ .
Drake's well proved oil could be found and produced cheaply through drilling.
A new industry was born overnight.
Kerosene lamps lit homes, farms, and factories worldwide.

The Oil Boom

The cry went up: "The crazy Yankee has struck oil".
Like a gold rush.
Boom and bust cycle.
One well paid $15,000$ profit for every dollar invested in two years.
Overproduction drove prices down from $10$ to $0.10$ a barrel in one year.

The Tarbell Family in the Oil Region

The Tarbell family (Frank, Esther, Ida) moved to Cherry Run.
Dirty, violent, and sleazy environment.
Ida's childhood amidst derricks, engine houses, and tanks.
Oil-stained everything.
Mother realized a place of perils, a derrick inviting to adventurers climbing at the door, the creek rushing wildly at the side of the house, Great oil pits sunken in the earth not far away.
Father made wooden barrels for oil storage and transportation.
Franklin Tarbell was in the right place at the right time.
His business, Tarbell's Tanks, was successful.

Early Challenges in the Oil Industry

Not enough barrels to be bought in America.
Challenges in capturing and storing oil.
Franklin Tarbell developed wooden tanks and made a lot of money.
Gushers, sprouters, and fountain wells made fortunes overnight.
Metal tanks replaced wooden tanks.

Boom and Bust

Many people were enriched and ruined in a short period.
Overcrowded drilling sites.
The oil industry operated by the rule of capture, leading to overproduction and depletion.

Pithole

Oil fever reached a peak after the Civil War in Pithole.
Franklin Tarbell joined the rush.
John Wilkes Booth lost money.
Oil gave out after just 500 days.
Land prices plummeted.
Pithole became a ghost town.
Franklin Tarbell bought the town's fanciest hotel for $600$ , tore it down, and used the lumber to build a family home in Titusville.

Railroads and Competition

Railroads came to the oil region and Oil City.
Cleveland began to compete as a refining center.
John D. Rockefeller started in business as a bookkeeper.
Rockefeller was conscious of cost and plowed every penny back into the business.
Refinery Number 1 grew, providing economies of scale.
Unit cost of kerosene went from $6¢$ to $3¢$ a gallon.
Economies of scale increased bargaining power with railroads.
Transportation costs were significant.
Rockefeller aggressively pursued lower transportation costs.
Rebates: Rockefeller got a rate of $1.30 vs. $2, a rebate of $70¢$ .

Rockefeller's Strategy

By the late 1860s, the oil business was in a deep depression.
Rockefeller aimed to eliminate rival refiners and create an efficient combination of producing and marketing companies.
Our plan: to gain control of the American oil refining industry.

The South Improvement Company

In 1871, railroad companies approached Rockefeller with a secret plan.
Small independent producers would subsidize Rockefeller through a hidden payment called a drawback.
Rockefeller could demand part of his competitor's railroad rate.
The railroad channeled Rockefeller's drawback through the South Improvement Company.

The Oil War

News of the conspiracy leaked out.
Freight rates were going up: all members of the South Improvement Company were exempt.
Independents reacted with fury.
$3,000$ men marched through Titusville and denounced the octopus.
Franklin Tarbell was one of the leaders of the independents.
They formed the petroleum producers union and vowed to sell no oil to anyone associated with the South Improvement Company.
The South Improvement scheme was exposed by the press.

Rockefeller's Business Practices

Rockefeller knew how his business should be run.
While it may not have been illegal at the time, it was probably immoral.
Governed by what seemed best for the interests of his company.
Practices included predatory pricing, the rebate system, industrial espionage, and spy systems.
Standard Oil had its own code book; Rockefeller was chowder.
Rockefeller forced railroads to spy on competitors.
Rockefeller talked about conquest and refining in terms of war.

The Cleveland Conquest

Rockefeller would move into a city, offer to join them, or crush them.
Cut prices through secret companies to force competitors to join the Standard Oil Trust or go out of business.
Everyone in a group of leading refiners would be working for Rockefeller or out of business.
Rockefeller said, "You can't compete with the standard. If you refuse to sell, it will end in your being crushed".
Some of those driven to the wall included Robert Hanna, W. H. Duane and John Alexander.
Even Rockefeller's brother, Frank, was driven to the wall.
Those who accepted stock became wealthy.

Rockefeller's Personal Life

Independently rich outside of oil.
Lived on Euclid Avenue in Cleveland.
Avoided vulgarity and ostentation.
Maintained frugality.
Pillar of the local Baptist church and taught Sunday school.
Supported the church liberally, gave to the poor, and visited the sick.

Rockefeller's Public Image

Image of a Baptist Sunday school teacher who ruthlessly crushed competitors.
He saw no contradiction; he thought he was playing by the rules of capitalism.
He believed the power to make money was a gift of God, and it was his duty to use it for good.

The Impact of Kerosene

Company named Standard Oil to suggest a safe and reliable product.
Made it his mission to give the poor man his cheap light.
Oil and kerosene lamps transformed the lives of ordinary people.
Waste in Western Pennsylvania contrasted with Rockefeller's determination to gain mastery.

Rockefeller's Growing Control

Ida Tarbell likened Rockefeller to Napoleon.
At the beginning of the 1870s, Rockefeller controlled one-tenth of the refining capacity in the United States; he gained control of $90%$ within nine years.
Acme Oil, headed by John Archbold, was a blind tiger to acquire refineries along Oil Creek.

The Rise of the Modern Corporation

Appalled by the rise of the modern corporation.
Threatened their way of life.
John D. Rockefeller integrated production, refining, transportation, and marketing into one company.
Individualism was gone.

Opposition to Rockefeller

Seemed undemocratic and un-American to small family businesses in the oil region.
Franklin Tarbell believed in working for himself and saw working for someone else as a sign of a lack of moral fiber.
Ida Tarbell saw the human cost of the great combination.
There was great financial tension in the home.

Independent Oil Men's Resistance

Independent oil men made one last attempt to break Rockefeller's stranglehold.
They decided to build the world's first long-distance pipeline.
Railroads wouldn't give the right of way.
Independent pipeline succeeded; Rockefeller built a bigger network.
*

Standard Oil's Global Reach

Standard Oil was nicknamed the old house.
Headquarters in New York City: empire.
One of the first great multinational corporations with a global reach.
Produced $25%$ of the world's kerosene consumption.
Controlled $90%$ of the oil refined in the United States and monopolized its transport.
Workforce twice the size of the U.S. Army.

Challenges and Strains

The strain of building a corporation took its toll on Rockefeller.
Work by day and worry by night.

The Threat of Electricity

Edison's development of the light bulb threatened the oil business.
But the automobile came to the rescue.
Henry Ford's assembly line created a new market for petroleum.
Gasoline had been a nearly worthless byproduct.
New fines and new oil fields meant new worries for Rockefeller.

New Oil Fields and Competition

Rockefeller's monopoly was based on Northeastern oil fields.
Discovery of vast new fields in the Southwest and West undermined his ability to control the oil industry.
New fields were more prolific.
Spindletop Texas: a new oil boom.
Texans saw Rockefeller as a foreigner.
Texans became obsessed with protecting Texas's oil from John D. Rockefeller.

Antitrust Sentiment

Rockefeller faced controversy every step of the way.
He became hated, embodying the trust and monopoly.
President Theodore Roosevelt made the trust the burning issue of the day.

Ida Tarbell's Expose

Ida Tarbell wrote a major series on monopolies for McClure's magazine.
Ida Tarbell tracked Rockefeller for almost a year.
Articles appeared in McClure's magazine for two years.
She never denied the true greatness of Standard Oil, but her articles spelled disaster.
Willing to combine and grow but only by legitimate means.
The smoking gun was that someone brought to her records from the railroads showing that Rockefeller had been given special rates and that this was, in fact, illegal.
John D. Rockefeller's brothers came to her with their own stories about John D. Rockefeller. Rockefeller's response was "Let the world wag".
Tarbell exposed Rockefeller's practices, and the nation was appalled.

The Supreme Court Decision

The Supreme Court's decision became inevitable.
In May 1911, the Supreme Court ruled on whether Standard Oil was an illegal monopoly.
Standard Oil was given six months to dissolve itself.
*

The Aftermath

Standard Oil was broken up.
Great business of oil had to flow within the banks of the law.
Gasoline would speed the growth of corporate giants.
Rockefeller and Standard Oil helped create a global economy.
Hatred for big oil was a lasting legacy.

Rockefeller's Later Life

Rockefeller held stocks in standard successors and doubled his fortune.
He led world crusades against epidemic meningitis and yellow fever.
Founded the University of Chicago and one of the first colleges for black women.
He gave away $530,000,000.
His public image began to change.
John D. Rockefeller died in 1937.

Ida Tarbell's Legacy

Late in her life, Ida Terbell was asked what she would change if she rewrote her famous articles, she said, "Not one word, young man. Not one word."