Rockefeller and Standard Oil: How One Man Controlled 90% of the Oil Market
There is a famous Rockefeller quote: “Competition is a sin.” Most people hear that and think it is just a rich guy being arrogant. But when you read Chapter 5 of Torsten Dennin’s “From Tulips to Bitcoins,” you realize this was not just talk. This man actually eliminated competition. All of it. He controlled 90% of the oil refining in the United States. One person. Ninety percent.
Let me tell you how he did it.
Oil Comes Out of the Ground
August 27, 1859. Colonel Edwin Drake struck crude oil near Titusville, Pennsylvania. This was the moment everything changed. Before Drake, oil was just some weird liquid seeping out of rocks. After Drake, it was money.
The timing was perfect. The Civil War was about to start, and the military needed fuel, lubricants, and kerosene. Oil prices shot up to over 100 dollars per barrel in today’s money. Suddenly everyone wanted in. Hundreds of small refineries popped up along the transport routes to Pittsburgh and Cleveland. It was a gold rush, but for oil.
A Kid From Nothing
Here is where Rockefeller enters the picture. In 1863, a 24-year-old kid from Cleveland started a small oil refinery with his brother William. This was not some privileged heir. John D. Rockefeller was a son of penniless German immigrants. He worked as a dishwasher during school and graduated as an accountant.
He started right in the middle of the chaos. The oil boom had spiked production so much that the price crashed from 20 dollars per barrel in 1861 all the way down to 10 cents. Ten cents. From 20 dollars to 10 cents. That is a 99.5% drop. By 1866, the price recovered to about 1.50 dollars per barrel, but the lesson was clear. The oil business was wildly unstable.
Most people saw chaos. Rockefeller saw opportunity.
Building the Machine
In 1870, Rockefeller founded the Standard Oil Company. And then he started doing what he did best. Consolidating.
In 1871, he formed an alliance with other refineries to negotiate big discounts with the railways. If you control enough volume, the railways have to give you a better price. And if you get a better price on transport, you can undercut everyone else on the final product. Simple math, brutal effect.
This led to what became known as the Oil War of 1872. Smaller refineries could not compete with Rockefeller’s discounted transport costs. By the end of 1872, Rockefeller became president of the National Refiners Association, representing 80% of US refineries.
By 1873, he had acquired or controlled almost all refineries in Pennsylvania. The state where oil was discovered. He just took the whole thing.
The Squeeze
Between 1875 and 1878, Rockefeller traveled across America, personally convincing the 15 largest refineries to join Standard Oil. His pitch was simple. Join us or we will destroy you.
And he was not bluffing. Smaller refineries that refused had a bad time. One of them, the Vacuum Oil Company, saw its plant go up in flames. Others were forced to sell for below half their market value. You either joined the machine or the machine rolled over you.
By 1882, Standard Oil controlled more than 90% of US oil refining. But Rockefeller did not stop at refining. He built his own pipelines. He created his own sales channels. He controlled the entire crude oil value chain in the United States. From the well to the consumer, everything went through Standard Oil.
That same year, 1882, the National Petroleum Exchange opened in New York City. Oil was now officially a traded commodity. And guess who dominated the market?
The Fortune
How much money did all of this make? By 1913, Rockefeller’s fortune reached about 900 million dollars. Adjusted for inflation, that is roughly 300 billion dollars in today’s money. More than two times what Jeff Bezos had at his peak. Let that sink in. The richest person in the modern world was only half as rich as Rockefeller was over a hundred years ago.
And he built all of this from a dishwasher job and an accounting diploma.
The Breakup
In 1911, the US Supreme Court finally stepped in. They ordered Standard Oil dismantled. The monopoly was too powerful, too controlling, too much for one company to hold.
You would think this would be the end of Rockefeller’s fortune. It was not. When the breakup was announced, Standard Oil’s share price fell. And what did Rockefeller do? He bought back stock at the lower prices. The breakup actually made him richer.
Standard Oil was split into 34 separate companies. And here is the part that makes your jaw drop. Two of those companies eventually became ExxonMobil and Chevron. Today, ExxonMobil alone is one of the largest publicly traded companies on the planet. Rockefeller’s broken-up monopoly produced multiple giants that still dominate the energy market over a century later.
The Rockefeller name stayed in power too. Nelson Rockefeller served as Vice President of the United States from 1974 to 1977. David Rockefeller, the last surviving grandson, died in 2017 at the age of 101.
What This Chapter Made Me Think
Reading this in Dennin’s book, a few things stand out. First, the pattern from earlier chapters shows up again. A new resource is discovered. Early chaos. Someone smart consolidates while everyone else panics. The consolidator gets insanely rich.
But this chapter is different from tulip mania or wheat speculation. Rockefeller did not ride a bubble. He built a machine. He did not bet on prices going up or down. He made sure that no matter what the price was, every barrel of oil went through his operation. That is a different kind of play.
The other thing that hits me is scale. We think of tech billionaires as the richest people in history. They are not even close. A guy born to immigrant parents in the 1800s, working as a dishwasher, built a fortune that dwarfs anything Silicon Valley has produced. With no computers, no algorithms, no venture capital. Just oil, railways, and a total refusal to tolerate competition.
“Competition is a sin.” He meant it.
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Next: Chapter 6: Chicago Fire Wheat
This is part of my From Tulips to Bitcoins book retelling series. New posts every week.