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John D. Rockefeller And Standard Oil

1938 words - 8 pages

As America’s first billionaire, few individuals in history can compare with John D. Rockefeller Sr. His wealth around the turn of the 20th century would be worth roughly twenty-two billion dollars in modern United States dollars. It is undeniable that Rockefeller changed the landscape of the American petroleum industry by defining the nature of oil production. By 1883, Rockefeller was laying the foundations for what we now know as the vertically integrated company and the modern multinational. The fruit of Rockefeller’s labor, the Standard Oil companies, controlled ninety five percent of petroleum refining and transport by 1880. It would not come as a surprise, given Rockefeller’s opulence, to find Standard Oil and its business practices under close scrutiny by his competition as well as the federal government. Rockefeller’s ruthless and legally questionable business tactics threatened the well-being of the United States’ capitalistic economy. Although the federal government had a prepared response to monopolies, the Sherman Antitrust, it was not enforced to its fullest potential because of the overwhelming influence possessed by Rockefeller due to his wealth. At the time of Standard Oil’s dissolution, their prominence was already waning, providing an entry point for powerful trust busters, such as Theodore Roosevelt and influential writer, Ida M. Tarbell. Standard Oil was allowed to exist for over a decade because of the economical, political, social, and legal complications in separating Rockefeller’s companies and the oil industry. The proper environment for a dedicated antitrust effort existed only after Standard Oil’s initial decline in influence.
During the boom of big business towards the end of the 19th century, economically speaking, it was advantageous for the United States government to prevent the development of monopolies and trusts. In a monopolistic environment, a single firm dominates the industry by being the sole seller without close substitutes, setting the price for their products, and maintaining a high barrier to entry preventing competition. Given this definition, it becomes apparent that the monopoly undermines social and economic progress in an industry. In the case of Standard Oil, a constant demand for petroleum products allowed the trust to operate without need for innovation. Without competition offering alternatives to the output of Standard Oil, consumers had no choice but to accept whatever product Standard Oil distributed. Therefore, a company wanting to capitalize on profits has no desire to spend precious capital on innovations in its products or to provide a superior product. Not only does a monopoly operate without competition, it takes measures guaranteeing its sole dominance over the industry.
Standard Oil, the owner of most of the tank cars on the New York Central and Erie, dictated to the railroads which refinery competitors could use their cars. Secret ownership or control of pipelines gave...

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