Historical Image Versus Reality

When you hear any mention of John D. Rockefeller you now doubt conjure up an image in your mind of one of our earliest “oilmen” who built a vast oil empire.  Well, that is partially true but only in the most generic sense.  Our modern definition of an “oilman” is someone or a company that explores for and produces crude oil.  That is the way it has been for more than a century now.    That is the typical persona of the Texas oilman; someone going around and drilling holes in the ground looking for crude oil.  That however is not the way that Rockefeller got his start.

The first oil fields you may recall were discovered in Pennsylvania in 1859 in the western portions of the state.  It was an area like others around the country where oil literally would seep up to ground level and had been used for a very long time for medical uses and some small amount for lighting but there had not been any organized drilling and searching for wells that would produce the crude on a sustained and substantial basis.   We have to remember that prior to this time a reliable and affordable source of lighting was a real and vital need.  For centuries and indeed eons Man had been using a variety of sources and means for lighting at night.  In our modern world with light at the flip of a switch we forget how dark and drab things get in a home or cave for that matter when the sun goes down.  Various oils had been used since before Biblical times but they were expensive and short burning and sooty and smelly.  Also folks had used candles for centuries made from various materials.  Animal fats had been used for centuries. But the y were smelly and very labor intensive to make and inconsistent in quality.   During the early 19th century whale oil came into vogue in a major way for lighting.   It burned better and with less soot and odor.  But it was expensive.  I mean remember Moby Dick and how hard it was to get those whales for the oil which had to be extracted on board ship.  Then it had to be transported from the port cities which further increased its cost.  You remember the stories about A. Lincoln reading by the firelight.  That was true for most people of that era.  The old expression about being “worth the candle” reflected a true economic reality of the cost of lighting.

In 1859 Rockefeller was a successful merchant in Cleveland.  That was a major transshipment port for goods from the Midwest going to the Eastern seaboard.  When the oil wells were first discovered Rockefeller went there to explore the business opportunities.  After looking things over he concluded the best business investment was to be in the business of refining the crude oil.  Rockefeller was in the refinery business, he was not an oilman the way we think of them.  The crude was shipped originally in barrels then by train to Cleveland where it was refined.  What Rockefeller made and what made his fortune was kerosene, not crude oil.  Many others quickly got into the same business of refining but he was determined to produce a good and consistent quality of kerosene because the quality in those days did vary a lot with some producing too much smoke and soot.  Thus the name for his new company–Standard Oil.  He wanted it to be a standard quality and delivered in reliable quantities and at affordable prices which required heavy volumes.

He built his empire over the next few decades by expanding into the early pipelines to transport the crude to the refineries and getting favorable deals with the railroads for shipping his kerosene.  His company is the one that first starting building those large oil tank cars you still see today on trains.  That way they eliminated most of the barrels for shipping the crude and the barrels were used only to ship the kerosene.  He was criticized for his sweetheart deals with the railroads by his competitors and even the crude oil suppliers.  His actions were not illegal in that era before the Sherman Anti-Trust Act.   He made a quality product and the public loved it.  It was reliable and cheap compared to other sources of lighting.  He of course ended up with competition in spite of all his efforts to eliminate it.  Just as Microsoft was the King Kong of the tech world for so long, there is always someone else who comes along with another idea and does it as well as you.  The next major oil find in the world was in Russia near Baku.  Rockefeller was already shipping millions of gallons a year to Europe of his kerosene because they liked as much as we did.  They started eating into his market.  Then of course along came a fellow named Edison who in the 1880’s fired up the first electric generation plant in New York city and also started producing the light bulb.  Both ideas and technologies grew and spread but for many for decades the old kerosene lamp was still the most affordable or practical source of light.  Even the use of natural gas began to be used for lighting in the cities in the later decades of the 19th century.  Things never stand still in the business world.  But Rockefeller expanded his empire to searching for crude oil  and then into railroads and other profitable ventures.   But his fortune was built upon the foundation of something as simple as providing light at night.   His product was indeed much cheaper, produced better light and was more dependable than the other sources of the day.  The average American benefited greatly from his innovations and business acumen even as some of them cursed him for his aggressive business activity.  Interesting to observe that he was a Baptist, a teetotaler and a very generous person with charities.  There were no scandals in his personal life and he lived rather modestly when compared to his enormous wealth.

On a personal note, I recall as a child in the 40’s we had a close family friend who lived in the country on a lake in a cabin with no running water or electricity.  At night we used kerosene lanterns for light and an outhouse.  He used rain barrels for his water needs.

“The best philanthropy is a search for cause, an attempt to cure evils at their source.”  J. D. Rockefeller.   www. olcranky.wordpress.com

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Filed under business, Economics, history

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