John D. Rockefeller

Rockefeller's Standard Oil Was a Classic 19th Century Monopoly

Photographic portrait of oil magnate John D. Rockefeller
John D. Rockefeller. Hulton Archive/Getty Images

John D. Rockefeller became one of the most notorious of the robber barons of the late 19th century by exerting tight control over the American oil industry. After starting from humble beginnings, Rockefeller would create the Standard Oil Company, which refined 90 percent of the oil produced in America by 1880.

Rockefeller shunned the spotlight, but by the end of the 19th century muckraking journalists and reformers constantly held him up as an villain engaging in unfair business practices.

There was no denying that his monopolistic tactics eliminated competition and could dictate prices.

In the 1890s Rockefeller withdrew from business, and like his rival and occasional ally Andrew Carnegie, he devoted himself to philanthropy. By the end of his life he had given away more than $500 million. And an organization he created to manage the dispersal of his fortune, the Rockefeller Foundation, continues to the present day.

Early Life

John Davison Rockefeller was born in Richford, New York, on July 8, 1839. His father was involved in various businesses, ranging from lumber to patent medicines. The family moved west, settling in Cleveland, Ohio, in 1853.

After finishing high school in Cleveland, and briefly attending a commercial college, Rockefeller began working at the age of 16. His first job was clerking in a produce business.

Learning what he could about business practices, Rockefeller was ambitious enough to start a new company at the age of 19.

Along with a partner, Maurice Clark, he formed a company that distributed and shipped grain, meat, and other goods.

The firm of Clark and Rockefeller was quite successful, primarily because of Rockefeller’s exacting care in bookkeeping and organization. During the Civil War the firm prospered, yet Rockefeller realized the future of the firm was limited.

He began to shift his concentration toward something new: oil. In 1859 oil had been discovered in western Pennsylvania, and it appeared the new oil industry could have unlimited potential.

Rockefeller expanded into oil production, and his fanatical eye for detail proved very effective at finding profitable ways to refine and transport oil. By the end of the Civil War he had bought out his partners, and was busily borrowing money and expanding his business.

In 1867 Rockefeller partnered with Henry Flagler, and the two men began building a large and very efficient company. The concentrated on controlling all aspects of oil production: they were building their own barrels, and they even own a small fleet of boats. They even pioneered the use of railroad tank cars.

And with Rockefeller in charge, every possible efficiency was tested and implemented. He did not like to leave anything to chance.

Standard Oil

In 1870 Rockefeller, along with partners who held smaller shares, formed the Standard Oil Company. At the time of its formation, the company was responsible for about 10 percent of the oil refined in America. Within a decade it would dominate the market.

The oil industry in 1870 was fairly chaotic, as many small operators would enter the business.

Year after year Rockefeller’s growing company was able to eliminate the competition. Rockefeller’s system of controlling all aspects of the business, from drilling to refining to transportation, made it immune to competitors.

By 1880 Rockefeller’s Standard Oil had a near monopoly on oil refining.

The Public Spotlight

In 1882 Standard Oil formed a trust, meaning that various companies were brought together as one large company that could completely dominate the marketplace. Rockefeller’s contention was that the trust created stability in chaotic markets, and were therefore better for the economy and for society itself.

Many critics disagreed. Rockefeller and the Standard Oil Trust engaged in ruthless business practices, making it impossible for a fair and competitive marketplace to exist. Reformers, crusading journalists, and eventually politicians began to agree.

Rockefeller began to be portrayed as an evil robber baron. And with the passage of the Sherman Anti-Trust Act in 1890, he was obviously the target of governmental action.

Standard Oil dissolved its trust in 1892, though in practical terms the organization and leadership of the company remained much the same.

Philanthropy

It is often believed that Rockefeller, perhaps in reaction to the public outcry over his business practices, suffered a nervous breakdown of some sort in 1891. He lost all his hair, and he suffered ill health for years.

In 1897 Rockefeller retired from business at the age of 58. He devoted himself to giving away large sums of money to various charitable causes.

Rockefeller lived to the age of 98. He died at his retirement home in Ormond Beach, Florida, on May 23, 1937. He had given away hundreds of millions of dollars.