OIL'S WELL THAT ENDS WELL?
In 1859, oil was “discovered” in Titusville, PA when a fellow by the name and title of Colonel Edwin Drake drilled the first commercially viable mechanical oil well. Oh, people round those parts knew about oil. It more than occasionally bubbled up from the ground or could be found in ponds, black, gooey and sticky. Problem was no one knew what to do with it.
For a while It was used by quack traveling medicine wagon men who claimed, when mixed with alcohol, hopefully grain and not rubbing, it was an all-purpose curative for all the illnesses it was more likely to give you by ingestion. Once crude “rock oil” was available in larger quantities, several distillery units, or stills, turned their attention most likely from producing moonshine to kerosene. When it came to lamp oil, kerosene, far heavier in weight than it’s lighter but more volatile cousin gasoline (which was routinely discarded), was the perfect substitute for the previously utilized whale oil and animal fat.
In 1870 John Davidson Rockefeller (JDR), who paid another person to take his place in the Civil War (an earlier version of draft dodging and bone spurs) established Standard Oil and built his first refinery near Cleveland. Within ten years JDR would control nearly 80% of all refineries and pipelines in the United States. He made several Faustian deals with the various rail road tycoons of the time. Vanderbilt, Astor and Carnegie were all involved. My favorite railroad robber baron is Jay Gould. It’s not that his actions were so very much more heinous than those of his competitors, but when asked if he feared a labor uprising famously said;
"I can hire one half of the working class to kill the other half."
And you think we have it bad now. In a stroke of genius turned evil, JDR realized it didn’t matter who owned the oil in Pennsylvania. What mattered is who could get it to a refinery in and around Cleveland, OH. This invariably involved tanker cars and railroads and the greedy men who owned them. A public trust, or utility the railroads were supposed to be available to all who wanted to use them, first come first serve. That didn’t happen. By leveraging his scale of oil production/distillation John D., for all intents and purposes controlled what oil did and did not make it onto the tracks. At one point, he demanded a “rebate” or “drawback”, from the railroads for every barrel of his competitor’s oil transported by railroads who wanted to carry his oil. Shipping discounts for larger customers on their products was not unknown, but on competitor’s shipments? For whatever their reasons, (aside from avarice and greed) these Captains of Industry of the Gilded Age paid them gladly.
Today, JDR is considered one of the greatest capitalists our country has ever produced. This is rather odd as John D. went on record several times saying he was not a capitalist and he didn’t believe in capitalism. He was a monopolist, or someone who believed if the best, most efficient company could corner the market and shut out all competition, they should be able to do so. Due to efficiency in manufacture and its effect on the market, the public would benefit by receiving the best products at the best price. Sounds good in theory. Doesn’t it?
Unfortunately, his almost messianic pursuit of a lamp oil monopoly led JDR to develop what we today would recognize as modern predatory business practices with a capital “P.” When necessary, he destroyed competitor’s infrastructure, oil rigs, factories and refineries. He tore “unfriendly” train tracks out of the ground. It was once suggested without hint of exaggeration JDR was responsible for the ruin both financially and otherwise of tens of thousands of lives in and around the oil fields, and the oil industry in general. It is not hyperbolic to suggest Rockefeller is primarily the reason we have anti-trust laws today.
In her book the Making of Standard oil, Ida Tarbell, a turn of the 20th Century muckraker detailed many of JDR’s dastardly deeds, all constructed from transcripts of court testimony given under oath. Rockefeller sued her for libel. She won.
http://www.pagetutor.com/standard/ (FULL TEXT)
It cannot be overstated that without oil and probably JDR, America would not be the superpower world leader it is today. But the Age of Oil is coming to an end. Recent trends suggest Saudi Arabia’s exportable oil reserves will run out as early as 2035 (perhaps earlier). The world's cheapest oil exporter will export no more. Green technologies are rapidly gaining a dominant position in the world’s energy markets. It is only a matter of time.
For those would-be tycoons/robber barons of the 21st Century who want to be the next JDR, and there are many, where will they find a commodity dependent not on supply, but on transportation, pipelines, a utility susceptible to bribery and corruption? Where does the arrow point? I’m thinking about Michigan, Flint to be precise. I’m thinking about aging infrastructure, leaky if not altogether non-functional pipelines. I’m thinking about global warming and the deforestation of the Brazilian rain forest. I’m looking at deregulation of pollution standards. I’m looking at radioactive coal ash and toxic mining operations runoff. I’m looking at pipelines guaranteed to leak being given the green light near natural aquifers.
My advice, don’t get addicted to fresh, clean water. Except in a bottle. At increasingly and possibly alarming price increases due to decreased availability, supply and demand and of course fluctuations, both real and manufactured in the “market.”
And all of this from an industry about to be replaced by the electric light bulb. Of course, then came the combustion engine, but that’s another story for another time.