[Editor Note: This five-part series by Mr. Epstein, originally published in The Objective Standard, revisits the Standard Oil Trust controversy on this the 100th anniversary of the breakup of the Trust. Part I reviewed the flawed textbook interpretation of Rockefeller’s accomplishment; Part II sketched the rise of Standard Oil and defended the free-market practice of rebating.
The 1870s was a decade of gigantic growth for the Standard Oil Company. In 1870, it was refining fifteen hundred barrels per day—a huge amount for the time. By January 1871, it had achieved a 10 percent market share, making it the largest player in the industry. By 1873, it had one-third of the market share, was refining ten thousand barrels a day and had acquired twenty-one of the twenty-six other firms in Cleveland.…
[Editor Note: This five-part series by Mr. Epstein, originally published in The Objective Standard, revisits the Standard Oil Trust controversy in this the 100th anniversary of the breakup of the Trust. Part I yesterday reviewed the flawed textbook interpretation of Rockefeller’s accomplishment.
The Standard story begins during the U.S. Civil War. In 1863, the first railroad line was built connecting the city of Cleveland to the Oil Regions in Pennsylvania, where virtually all American oil came from. Clevelanders quickly took the opportunity to refine oil—as had the residents of the Oil Regions, Pittsburgh, New York, and Baltimore. Cleveland had the disadvantage of being one hundred miles22 from the oil fields but the advantage of having far cheaper prices for materials and land (Oil Regions real estate had become extremely expensive), plus proximity to the Erie Canal for shipping.…
[Author’s Note: This year marks the 100th anniversary of the Supreme Court ruling that found Standard Oil guilty of violating the Sherman Antitrust Act. As punishment, the world’s largest and most successful oil company was broken into 34 pieces.
Ever since, Standard Oil has served as the textbook example of why we need antitrust law–in the business world in general and in the energy business in particular. The Court’s decision affirmed a popular account of Standard Oil’s success, first made famous by journalists Henry Demarest Lloyd and Ida Tarbell. In the absence of antitrust laws, the story goes, Standard attained a 90% share of the oil-refining market through unfair and destructive practices such as preferential railroad rebates and “predatory pricing”; Standard then leveraged its unfair advantages to eliminate competition, control the market, and dictate prices.…