Term Paper on "John Davison Rockefeller"

Term Paper 12 pages (3442 words) Sources: 5 Style: APA

[EXCERPT] . . . .

John D. Rockefeller, Sr.

John Davison Rockefeller, Sr.

John D. Rockefeller, Sr. was an empire builder, a philanthropist, a hero and a ruthless businessman. His Standard Oil Company was the greatest business empire in the United States at the beginning of the twentieth century (Vavra 2000). In fact, Rockefeller was such a shrewd businessman that before he was forty years old, he controlled about 90% of all oil refining in the United States (Vavra 2000). Moreover, after creating Standard Oil in 1870, he realized that a significant factor was transportation, thus he created a conspiracy with the railroads called the Southern Improvement Company that not only gave preferential rates to Standard Oil but also gave punitive rates to his rivals (Vavra 2000). In 1913, the entire federal budget was $715 million, and Rockefeller worth was $900, therefore he could have personally paid every federal employee and expense and still had money to spare (Vavra 2000). Rockefeller had a profound impact on American politics by making sizeable contributions to campaigns. His grandson Nelson became governor of New York and vice president under Gerald Ford. Interestingly, Nelson was born on John Sr.'s birthday, July 8, and at that time John D. Rockefeller was the wealthiest man in the world (Persico 1982). Another grandson Winthrop became governor of Arkansas, and his great-grandson Jay became a U.S. Senator from West Virginia (Vavra 2000). During his lifetime, Rockefeller established several foundations and donated more than $540 million to charity.

John Davison Rockefeller was born into a modest family in Richford, New York on July 08, 1839. By 1853, the family had moved to Ohio, where John enrolled in Central High School in Cleveland. As a student he attended the Erie Street Baptist Church and at the age of 21, had become a trustee for the church (John 1997). In 1855, he left high school to attend Folsom Mercantile College, where he completed a six-month business course in three months. He then took a position at Hewitt and Tuttle as an assistant bookkeeper and within three months was given a raise and became the cashier and bookkeeper (John 1997). By 1859, he had saved $1,000, and with that plus another $1,000 from his father, Rockefeller established a commission business with Maurice B. Clark. When that same year, the first oil well was drilled at Titusville, Pennsylvania, Cleveland became a major refining center, and in 1863, Rockefeller and Clark moved into a new business as oil refiners (John 1997). With Samuel Andrews, they formed Andrews, Clark and Company, however by 1865, disagreements among the partners led to Rockefeller buying the refinery for $72,500, and forming Rockefeller and Andrews (John 1997).

As the oil industry expanded, so too did Rockefeller's holdings, and in 1870, joined by his brother William, Andrews, Henry M. Flagler, and others, he formed the Standard Oil Company with a capital of $1 million (John 1997).

Within two years, Standard Oil controlled nearly all the refining firms in Cleveland, and two in New York. Soon it was refining some 29,000 barrels of crude oil per day. Moreover, the company had its own cooper shop manufacturing wooden barrels, and storage tanks that could hold several hundred thousand barrels of oil, plus warehouses and plants for manufacturing paints and glue (John 1997). In 1882, all of Standard's properties were merged into the Standard Oil Trust, with an initial capital of $70 million, however when the trust was dissolved by a court decision in Ohio ten years later, the companies joined in the formation of the Standard Oil Company in New Jersey, since the state had enacted a law that allowed a parent company to own the stock of other companies (John 1997). In the 1890's, Standard Oil owned approximately 75% of the petroleum business in the United States (John 1997).

Rockefeller also owned iron mines, timberland, and had holdings in numerous manufacturing and transportation companies and other industries. Although he had retired from active leadership in Standard in 1896, he continued to hold the title of president until 1911, when that same year, the United States Supreme Court found the company trust to be in violation of the anti-trust laws and ordered the dissolution of the parent New Jersey company, separating Standard's thirty-eight companies into individual firms (John 1997). At that time, it is estimated that Rockefeller owned 244,500 of the company's total of 983,383 outstanding shares (John 1997).

Most likely, Rockefeller decided to enter the oil refining business when the Atlantic and Great Western Railroad was coming to Cleveland. The railway line went from Meadville, Pennsylvania to Corry, Pennsylvania, and then into New York state, where it connected to the Erie Railroad, with branches in Titusville and Franklin, the center of the oil regions (Poole 2000). Thus, Cleveland now had tow routes to New York City, the New York Central-Lake Shore system and the Atlantic and Great Western, which gave the city a great advantage over Pittsburgh, which was dominated by the Pennsylvania Railroad (Poole 2000).

Rockefeller was only 24 years old when he bought out the Clark brothers and assumed control of the business. The main reason for the parting of the ways between the business partners was due to the fact that the Clarks did not believe that the company should expand by borrowing money, while Rockefeller believed it was the only logical way, thus he poured his profits into the business and took steps to increase the efficiency of the company (Poole 2000). He and his brother William built another refinery in Cleveland called the Standard Works, and opened an office in New York City with William in charge of exporting. The exporting business soon became bigger than the domestic ventures (Poole 2000).

Henry Flagler became a partner in 1867, forming Rockefeller, Andrews and Flagler, and by the following year, the company was the largest refiner in the world (Poole 2000). Both Flagler and Rockefeller were ambitious and believed in expansion. They realized that to maintain consistent profits in oil refining, it was necessary to make the business as large as possible and to utilize the waste products (Poole 2000). During this era, the refining process consisted of cooking the oil and then purifying it. The plant had large vats, stills, piping, and a few chemicals. A large refinery might cost $50,000 to set up, and a small one for $10,000 (Poole 2000). If the price of kerosene was high, even the small refiners could make money, and if they were driven out of business when prices fell, they could easily reenter the market (Poole 2000). Flagler and Rockefeller built high-quality refineries. They owned their own cooperage plant, their own white-oak timber and drying facilities, which reduced the price of a barrel from $3.00 to less than $1.50 (Poole 2000). They manufactured their own sulfuric acid, owned their own drayage service, owned warehouses in New York City and boats on the Hudson and East Rivers for transportation (Poole 2000). Moreover, they were the first to ship oil by tank cars, eventually owning their own fleet, and built their own holding tanks for storing crude and refined oil. They manufactured high quality lubricating oil for machinery, and gasoline (which many refiners dumped into the rivers) was used a fuel (Poole 2000). They manufactured:

Benzene (used as a cleaning fluid; a solvent for fat, gums, and resin; and to make varnish), paraffin insoluble in water, used for making candles, waterproofing paper, preservative coatings, etc.), and petrolatum (used as a basis for ointments and as a protective dressing; as a local application in inflammation of mucous membrane; as an intestinal lubricant, etc.

A white petrolatum later marketed under the brand name

Vaseline). They shipped Naphtha (volatile inflammable liquid used as a solvent in dry cleaning and in wax preparations, varnish and paint making, burning fluid for illumination, and as a fuel for motors) to gas plants and other users (Poole 2000).

Nothing went to waste in the process. The smallest details were given priority, and "economy, precision, and foresight were the cornerstones of their success" (Poole 2000).

The fact that Cleveland had access to two railroad systems, and also had access to water-borne shipping, gave Flagler and Rockefeller a great advantage with the railroads, for they were able to negotiate big rebates from them, thus, together with the size and efficiency of their business, Flagler and Rockefeller had a tremendous advantage over other refiners (Poole 2000). The railroads also benefited other Cleveland refiners, much at the expense of refiners in Pittsburgh who were forced to use the Pennsylvania Railroad. The Erie and New York Central looked upon the refiners as associates, and did not consider themselves victims of the refiners, for they shared common interests (Poole 2000).

When the Standard Oil Company of Ohio was created in 1870, it held roughly 10% of the oil business at the time. The company was divided as such: John D. Rockefeller - 30%; William Rockefeller - 13.34%; Flagler - 16.67%; Samuel Andrews - 16-67%; Stephen Harkness - 13.34%; and… READ MORE

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