A Huge Oil Ring
Baltimore American and Commercial Advertiser, February 24, 1872
The Pittsburgh Dispatch of the 22nd instant says:
A few days ago we made mention in a brief paragraph of a rumor that was prevailing in certain initiated circles, both in this city and in the oil regions, that there was forming among capitalists and railroad men of the country a gigantic oil monopoly, which, if successful, would throw the “oil bull ring” of 1869 far in the shade. The rumor was to the effect that a capital of at least $10,000,000, backed by $250,000,000 more, had been raised. And that a combination of the men controlling it, with all the railroads leading from the oil region, had been formed for the purpose of preventing the transporting of any refined oil from the oil regions, and of all crude oil, except such as would be used by the aforesaid capitalists in their own refineries.
This would, of course, give to this ring the control of all refined oil and to a certain extent of all crude oil produced. They could, therefore, fix their own price and reap a magnificent return from their capital invested, though it would be of course at the expense of the producers and the ruin of all refiners except those in the ring. The railroad companies would reap their reward by the increased and fixed rates of transportation that the ring agree to give them in consideration of their part in the huge monopoly.
The Titusville Herald also has the following upon the same subject:
The “South Improvement Company” is an organization chartered by the laws of Pennsylvania, and which it is claimed has been established for the purpose of protecting the refining interests of the United States, and the railroad interests immediately affected by the petroleum business. Within the last year a very large amount of crude oil has been shipped by the exporters, the result of which has been the building up of the refining interest abroad, thereby adding to the already largely increased facilities for refining in excess of the amount produced — the refining capacity in this country being already equal to three times the average production. As a consequence there has heretofore existed a ruinous competition between the refineries, by which all parties have lost money.
The entire petroleum business has been a losing one the past year, not only for refiners and producers but to the railroad companies who have transported the oil, the only parties who have profited by the situation being the foreign consumers. To obviate these difficulties in the future, and to protect all interests, a unity of action has been effected in the organization of the “South Improvement Company,” who propose to handle all the crude and refined oil in the United States, for which they propose to pay the railroad companies fixed and paying rates of transportation, and secure to both producer and refiner uniformly remunerative process throughout the year.
The plan of the Association is that all the refineries take stock to the amount of their several refineries, and share proportionately in the profits of its operation. The capital stock of the company is stated at $10,000,000, and claims to be backed by $250,000,000. The railroad combination includes the New York Central, New York and Erie, Baltimore and Ohio and Pennsylvania Railroad interests. The freights to New York will range from $2.55 to $2.66, highest on refined oil; 15 cents less to Philadelphia, and 15 cents more to Boston. The percentage is to be divided as follow: New York Central and New York and Erie, each 27 1/2 cents, Pennsylvania Railroad interest, including Baltimore and Ohio, 45 cents. The Refiners’ Association will have a drawback of from 75 cents to $1, thus, assuming the yearly product to be 5,000,000 barrels, affording the South Improvement Company a revenue of $5,000,000, independently of the legitimate profits on refining.
It is stated that the arrangement will go into effect on the 1st of March. The President of the Company, Mr. P. H. Watson (President of Lake Shore and Michigan Southern Railway) and the other officers, it is said, will be in Titusville this week to confer with our refiners, tendering them the same advantages extended to others, and admitting them on a common footing to the Association.