Carl Solberg’s book, Oil Power: The Rise and Imminent Fall of an American Empire is both a comprehensive survey of the oil industry from the middle of the nineteenth century to the present and a description of the impact of oil and the oil industry on American society and life. The book seeks to document the marvelous historic advantages conferred by oil and the fact that our oil is almost used up. The book also describes the power of oil in government, in our public life, in our private lives, and in the creation of our technological civilization. Finally, the author argues that the American oil empire is rapidly becoming a thing of the past. As Americans seek other energy sources, the power and influence of the oil empire will wane. The author’s view of the future is based on an excellent and highly readable survey of the history of the oil industry.
The American oil industry began with Edwin L. Drake’s success in drilling for and finding oil in Titusville, Pennsylvania, in October, 1859. Drake’s success began an oil boom similar to the California gold rush. Since American law granted subsoil wealth to those who owned the surface soil, Drake’s discovery convinced Pennsylvanians and other Americans to buy Pennsylvania land and begin drilling. The atmosphere was intoxicating. John D. Rockefeller imbibed and became committed to the prospect of building an oil empire. Rockefeller had started in the produce business in Ohio and had built a fairly substantial operation by 1863. However, he sold that business and began to concentrate on—indeed, become obsessed with—oil.
At first the oil industry focused on the development of kerosene, which was used in lamps. Rockefeller was no innovator. He adopted the good ideas and techniques of his competitors and through diligence and cost-saving attention to detail, outproduced and outsold them. His costs were invariably the lowest in the industry, and this permitted him to make profits in times of national prosperity or depression.
Rockefeller entered the oil business just as American industry was beginning an industrial boom at the end of the Civil War. Rockefeller could not have selected a more appropriate moment. His characteristics of shrewdness, audacity, and ruthlessness served him well in the late nineteenth century. In pursuing his oil business, Rockefeller went to the railroads and received concessions from them. Rockefeller and his associates were effective in dominating the Cleveland area. The railroad rebates that Rockefeller obtained permitted him to undersell all of his competitors from western Pennsylvania. By 1870 Standard Oil had the largest refinery in America. By his thirtieth birthday, Rockefeller was a leading industrialist in Cleveland. Now he began an effort to establish a monopoly by destroying all of his competitors through his domination of railroads. The legislature of Pennsylvania prevented Rockefeller from establishing the monopoly that he sought, but he had other ways to accomplish his objective. Eventually coming to dominate refineries in Pittsburgh, Philadelphia, and New York in the early 1870’s, Rockefeller even found the Panic of 1873 helpful in inducing competitors to sell out to him. Next, in the 1870’s, he began his involvement in the pipeline industry.
The Standard Oil Trust was created in 1882 to combine control over many Rockefeller enterprises. In this, Rockefeller set the pattern for trusts all over the United States. In 1889 the Standard Oil Company was reincorporated as a New Jersey corporation. By this time, Standard had come to dominate most of America’s refinery industry. Standard then made arrangements with firms elsewhere in the world to divide up the world’s petroleum markets and thereby permit Rockefeller to place his products in every state of the United States and almost everywhere in the world. Solberg flatly states, “What Rockefeller aspired to was nothing less than world conquest.”
Much as Rockefeller might have sought such a goal, the public became increasingly troubled about Standard Oil and frequently protested Rockefeller’s activities as journalists, politicians, and governmental officials began to publicize and investigate his methods. Henry Demarest Lloyd, Ida Tarbell, and the Populists turned their ire on Rockefeller and Standard, but in spite of investigations and the public outcry, Rockefeller’s empire remained intact, until in 1911 the Supreme Court dissolved the trust. By the late 1890’s, however, Rockefeller was reducing the scope of his personal participation in his company and after 1900 was confining ever more of his attention to his family and to a new passion—golf.
It was curious that Rockefeller would turn away from oil at just the time that it became an integral part of American life. This was accomplished by three related phenomena—the enormous increase in the supply of oil resulting from discoveries in Texas; the widespread use of the automobile, stimulating demand; and the growing recognition of the political importance of oil, resulting in the oil depletion allowance.
The initial development of oil in Texas was attributable to the activities of Governor James Hogg of Texas. He accomplished two things of importance in oil. First, he kept Rockefeller and Standard Oil out of Texas; and second, he and his cronies bought up lease after lease in Texas after oil was discovered.
Ultimately they owned a large part of the developing fields. Then Hogg and his associates allowed the Mellons into Texas and the Gulf Oil Corporation was founded. Other investors founded the Texas Company. From Texas, the oil companies moved on to Louisiana and Oklahoma and then began constructing a complex of pipelines that became the most profitable part of the industry. Eventually arrangements were made among Standard, Gulf, Texas, Royal Dutch Shell in California, and foreign refiners before World War I. The result was a transition from Standard monopoly to oligopoly among the refiners.
While the refiners were organizing their empire, the automobile was becoming oil’s chief customer. By 1911 in the United States, gasoline sales were greater than kerosene sales. By 1913 improvements in cracking processes helped meet the growing demand for gasoline. Servicing automobiles and providing them with a regular supply of gasoline was accomplished through the development of service or gas stations. As automobiles became an ever-more significant part of America, oil became a matter of public concern....
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