-Caveat Lector-
an excerpt from:
Mellon's Millions
Harvey O'Conner�1933
Blue Ribbon Books
New York, N.Y.
--[6]--
6
Spindletop's Golden Flood of Oil
THE lucky strike of a Yugoslav prospector brought to the Mellon treasure chest
its prize jewel, $743,000,000 Gulf on.
In the dreary, rainy winter of 1900, the prospector, member of the same race
of "hunkies" that toiled 12-hour shifts in the Mellon steel and aluminum
mills, was drilling with dogged persistence into a "salt dome" on the Texas
gulf plain. October 27, 1899, was the first date in his Spindletop log; since
then his drills had been pounding through the earth's crust and bringing
upsalt water, quicksand, hard rock, everything but the off-bearing sands that
presage oil itself. The story of that dismal winter could have been duplicated
by any one of a thousand wildcatters drilling on a shoestring for liquid gold
at the end of a rainbow of hope.
Anthony F. Luchich, born on the island of Hvar off the Dalmatian coast,
educated at Trieste and Graz in mining engineering, came to America literally
to seek the gold which lured, more figuratively, hundreds of thousands of his
compatriots. Prospecting for gold brought small fortunes, and losses that ate
them up. In 1899 be was mining prosaic salt and still dreaming of a lucky
strike, when he noticed in an advertisement that the Gladys City Oil, Gas &
Manufacturing Company's property near Beaumont, Texas, was for sale. The
Yugoslav, now known as Lucas, wrote to Patillo Higgins, leather-necked veteran
whose faith in Gladys City, out there in the long grass, was not matched by
money. Higgins accepted a deposit on his $33,500 price and Gladys City, a
shack or two, a weather-beaten rig crumbling to rot, a grass, grown road,
passed to Lucas.
Into the windblown shack Mrs. Lucas moved their worldly possessions; as the
winter wore on the furniture disappeared stick by stick, in exchange for ready
cash. Well versed in the life of a prospector's wife, she hammered together
boxes. The monotonous pounding of the drill went on.
Sands at the 575-foot level encouraged Lucas and Dr. William B. Phillips,
Texas geological survey director. There was oil in that dome, but he would
have to go deeper, buy more pipe, more drills. "Why not write to Guffey &
Galey, the Pittsburgh oil men?" suggested Dr. Phillips.
Lucas' letter reached John H. Galey at a propitious time. Western Pennsylvania
oil was a humdrum business now. The glamour of pioneer days, of big strikes in
new fields, of feats of courage and cunning in getting the precious liquid to
market, had long since departed under a stabilization imposed by Standard Oil.
Galey yearned for new fields to conquer.
The Pittsburgher took over majority interest in the Lucas hole. The terms were
another bitter disappointment to Lucas, but what else could a penniless
wildcatter do? To abandon a deep hole was sheer nonsense; continue it must.
His faith was rewarded on January 9, 1901, the biggest day in petroleum
history since Edwin Drake made his strike in 1859 on Oil Creek in western
Pennsylvania. Lucas heard the premonitory rumble of the earth and fled for his
life. With a deafening roar a great torrent of oil and mud rushed up through
the weakened rock, pushing ahead Of it 700 feet Of 4-inch pipe which hurtled
through the derrick, wrecking it to splinters. The Lucas gusher spewed its
black gold to a crest 200 feet above the dome.
Nothing like it had ever been known in all oildom. The great geyser was
shooting nearly 100,000 barrels a day at the sky. Colonel Drake had astonished
the world in 1859 with a 20-barrel well. Day and night the Lucas gusher
roared, shaking the countryside with the bellow of tons of oil shot up through
the 4-inch hole by the pressure of millions of cubic feet of gas which for
eons had been safely capped by the earth's folds.
Cries for help went out to Beaumont. Within 24 hours, hundreds of men and
forty four-horse teams were working like mad throwing up levees to ring the
flow. Wondering crowds streamed out of Beaumont to see the world's newest
wonder. Drivers fortunate enough to own or rent a carriage charged Klondike
prices.
Overnight the word "Spindletop" became known the world around wherever oil men
met.
While Lucas and Galey wrestled with the problem of capping the monster, a new
threat appeared. A match tossed carelessly by one of the thousands who paced
around the reservoir of oil, a little flame creeping through the brush, might
unite with hundreds of thousands of barrels of oil!
Fifty guards were hired by day, forty by night, to keep the curious at a
respectful distance. Signs were flung up on posts. It was futile. On the
fourth day, with a brisk wind blowing out of the north, the inevitable
happened. The flames licked along the edges of the pool, gathered courage,
leaped over the dike. In a half hour the Lucas gusher was a mass of fire that
shot hundreds of feet into the air. In a mad panic the thousands rushed to
waiting buggies and the horses fled down the road to Beaumont. A column of
smoke moved over the plain toward the Gulf of Mexico. Oil valued in the six
figures was being sacrificed on the earth altar of Prometheus.
When fire was conquered, workmen risked their lives once more to control the
gusher. A massive iron cylinder filled with sand was rolled near the roaring
torrent. The cylinder sank around the head of the well. It held. The roar
ceased, the ground trembled but did not give way. The Lucas gusher was capped.
The two men now stood in the presence of wealth-flat broke. The enormous
expense of subjugating the monster had drained Galey's last dollar. It was as
if gold had been discovered at the North Pole; there it was, but hundreds of
thousands, even millions of dollars would be required to bring it to
market�granted that there was a market for such overwhelming wealth.
Galey wired his partner, Colonel J. M. Guffey, for more money. Guffey obliged-
until his own resources were exhausted. Then he sought an appointment at 512
Smithfield Street.
Spindletop was the Klondike of oil. Men deserted their little wells in western
Pennsylvania to rush to Texas. Special trains pulled out of Houston,
Galveston, New Orleans, St. Louis, Philadelphia and New York. In Beaumont,
lazy Gulf coast town, beds returned their cost to owners in one night.
Reservations had to be wired in advance for rigs to take visitors to
Spindletop. Never had there been such a frenzy of speculation. Men bought and
sold land within 20 miles of the ten-foot hump on the coastal plain known
ironically as a "dome." Ranchers, dazed at first by unheard-of proffers, grew
cagey and would listen to nothing but cash offers involving tens of thousands
of dollars. One plot twenty feet square sold for $75,000.
Willing hands grasped Northern and Eastern speculators as they alighted from
the evening train and took them out to view their properties by moonlight, or
if that failed, by lantern light. Properties that never were recorded in any
deed book were sold, too, through gorgeous prospectuses that went to carefully
selected sucker lists throughout the country. As time went on and investors
waited in vain for oil and dividends, the name Spindletop changed to
"Swindletop."
Spindletop itself became a forest of derricks. Agents of Standard Oil, of
Governor Hogg of Texas, of a score of western Pennsylvania companies, surveyed
plat, maps and staked out foundations for huge firms yet unnamed.
Among those who evinced keen interest in Spindletop was William. Larimer
Mellon, son of James Ross Mellon and Rachel McMasters Larimer. He had served
his apprenticeship in his father's lumber and realty business in the East End.
So well satisfied was old judge Mellon with the progress of his oldest
grandson in carrying out the family's manifest destiny, that he was said to
have settled $20,000 on the youngster when he attained his majority.
William Larimer Mellon combined two money-making strains in his blood; the
cold, calculating Mellons, and the hot-blooded, adventurous but not less
money-eager Larimers. General Larimer was a pioneer in the Conestoga wagon
business across the Alleghenies before the days of canal or railroad. Later he
organized railroads in the Pittsburgh district, was proprietor of the
Youghiogheny Slack Water System for hauling coal, and of the Westmoreland Coal
Company. It was to Larimer, become a Pittsburgh banker, that Thomas Mellon had
recourse for advice on knotty financial problems in the days of his
apprenticeship.
Ile financial flurry of 1854 wiped out Larimer. His bank toppled, with heavy
losses to depositors. Thomas Mellon was named administrator of his estate,
with assets of $410,000 to balance against claims of $758,000 Larimer left for
Nebraska, became a Congressman, and later helped found Denver.
To look after some of his father's real estate speculations in Kansas, young
James Ross Mellon journeyed out to the plains after his winter in Milwaukee in
1864. What more natural than that he should visit his father's friend, General
Larimer, at Leav-enworth, to refresh himself after the dusty, hazardous trip?
And what more natural, after a hard winter in which he had eschewed the female
companionship against which his father had warned him, than that he should
look favorably upon young Rachel Lari-mer?
The marriage was managed by Judge Mellon, who feared calf love. Both were far
too young. Yet "the lady was one of good stock, her grandfather, John
McMasters of Turtle Creek, one of the wealthiest men in the city or county in
his day, had been my client from the time I was admitted to the bar until his
death, and had entrusted many important affairs to my management." He told
James to postpone all thought of marriage until he was 21 and then to take up
the Larimer matter as new business. The fires of love did not die down. The
wedding was consummated in 1867 and blessed a year later by the birth of
William Larimer Mellon. Within a few years James' older brother Thomas married
Rachel's bosom companion Mary Caldwell. judge Mellon was pleased, and
maintained the closest business relationships with her brother, a leading
Leavenworther, from that time on.
Trained in the speculative mysteries of realty, William Larimer Mellon sought
new fields for enterprise with his $20,000. He went into oil. Uncle Andrew was
not unfamiliar with the field. Occasionally he had taken a promising lease
himself in the western Pennsylvania oil districts, continually his money
backed professional speculators. Guffey & Galey were among his clients.
Good judgment and good luck-the two must be linked as closely as Siamese twins
for him who would hazard a penny in oil�led young William to Coraopolis, where
he struck a gusher. Emboldened, he reached out. In the early nineties he was
pioneering in the Sistersville field in West Virginia. The new flood of oil
was diverted into the W. L. Mellon Pipe Line Company's tubes, to connect with
the Ohio River at Coraopolis. The fingers of the line spread out into
southwestern Pennsylvania. That brought the Mellons to the attention of John
Davison Rockefeller.
Why a country store clerk turned Cleveland refiner should have become master
of the oil industry was one of Dame Fortune's quirks. Chances favored a
Pittsburgher�above all the MelIons. Pittsburgh was the center of the nascent
oil industry of the early -sixties., By William Larimer Mellon's time, the
main fields formed an arc whose center was the Iron City and whose arms
reached 75 miles to the north on Oil Creek and 70 miles to the south in the
new Sistersville district.
But Thomas Mellon was too cautious a man to risk much. He lacked the personal
audacity of the Cleveland refiner. His sons were too well trained in his
school and too well satisfied with the success of his technique of gathering
wealth to attempt the bold strokes that shot Rockefeller to the fore in
petroleum.
It could never be said though that Andrew Mellon failed to learn readily when
a new technique proved itself. Rockefeller's .was to control transportation of
petroleum. He let little fellows produce the oil; his Standard Oil stood at
the gate when they tried to sell. Court records revealed that dynamite,
bribery, treachcry were all in the repertoire when the little fellows tried to
market their own oil. His South Improvement Company forced railroads to double
their rates, rebate one-half on Standard Oil shipments, and pay to South
Improvement the added rate charged independents.
The independents tried to build a pipe line across the Alleghenies to the sea.
Their Tidewater Pipe Line Company found the right of way cut by lands bought
by Standard Oil at fancy prices. Railroads refused to let the pipe line cross
under their roadbeds, and then, at Rockefeller command, slashed prices on tank
car transportation far below the pipe line rate. Tidewater was harassed by law
suits, its credit shaken, finally some of its officers were bribed. The
company capitulated in 1883.
In 1892 the independents again took their courage in their hands and essayed
another pipe line across the mountains. Standard fought every foot of the way.
Each railway crossing meant injunctions and a fight in the courts. Railroad
employees filled up pipe line trenches as fast as they were dug, land agents
preceded them to obtain cancellations on right of way leases, telegraph lines
were cut down. Finally U. S. Pipe Line got to Hancock, N. Y., perilously near
the Hudson. Here not injunctions but a hundred armed men met the workers and
engineers. A fortress was built by the Eric tracks under which the pipe line
was to cross. A cannon was mounted, day and night patrol established, a beacon
built to call for reenforcements when needed, and barracks erected. The
deadlock lasted all winter with Hancock under private military occupation. The
independents, defeated by the long siege, had to find a new route from Wilkes-
Barre to tidewater.
The Mellons observed attentively. The pipe line was the key to the industry,
the producer nothing. They had cultivated markets of their own in Pittsburgh
and down the river, but they saw clearly the limitations imposed upon them.
The staggering profits of Standard Oil could never be duplicated so long as
the dominant markets of the East and Europe were locked against them by
Rockefeller's control of the tortuous tubes that ran uphill and down dale
across the mountains to the sea.
The bankers and their oil lieutenant, W. L. Mellon, consulted with surveyors
and engineers for the extension of the Mellon Pipe Line. A rich market awaited
their 3,000,000 barrels annual production. Contracts would be signed eagerly
by European distributors, rebellious against the Standard monopoly, as soon as
Mellon oil could be delivered on tankers. Orders were given in 1893 to build
the line. If the battle with Standard should get too warm for comfort, there
was the near certainty that the new trans-Allegheny line could be sold to the
trust at a decent figure.
As soon as the snow had cleared from the mountains, workmen began digging the
long trench to carry the Crescent Pipe Line to Marcus Hook on the Delaware
River, near Philadelphia. The route lay through the sparsely populated
southern tier of Pennsylvania counties and ended at the Mellons' new refinery.
The Pennsylvania Railroad offered no opposition to the Pittsburgh bankers.
Nor did Standard Oil. Its lobbyists however became suddenly active at
Harrisburg. This time they were asking the repeal of the law of 1883
forbidding the merger of competing pipe lines. Incensed legislators had tried
by that law to lock the stable after the horse-Tidewater Pipe Line-had been
stolen by Standard. Thomas M. Marshall of Pittsburgh introduced the repealer
which passed House and Senate in 1893 only to meet a veto by Governor Pattison
who in a previous term had signed the original bill.
In 1895 Standard had better luck. A new governor, a man more reconciled to the
inevitable march of monopoly, was now in office. He signed the repealer.
Hardly was the ink dry when the Mellons sold Crescent Pipe Line to National
Transit, pipe line subsidiary of the oil trust. It was a neat stroke of
business that tickled old judge Mellon and filled the Mellon vaults with ready
cash for immediate ventures. The purchase price was reported to be $4,500,000.
The line had cost the Mellons $2,500,000, and they had enjoyed the fat profits
of two years' operation.
So when Colonel Guffey called at the Mellon bank to discuss Spindletop's
problems, he was not talking with novices in the business. W. L. Mellon and
his two uncles listened attentively to Colonel Guffey's reports about the new
Golconda. Later they conferred it was not a venture to be rushed into. Oil is
speculative, and its very abundance in the diked reservoir on the Texan plains
might prove embarrassing, as did aluminum's in 1889. Who wanted so much oil?
The production of Spindletop alone in the next three years was to equal all of
Pennsylvania's wells combined. Pipe lines must be built to the coast and
immense storage tanks and refineries erected. Markets must be developed. This
was the biggest thing the Mellons had yet handled.
The $15,000,000 J. M. Guffey Petroleum Company was their answer. Guffey was
given the presidency, $1,000,000 in cash and $500,000 to be taken from
dividends. A. W. Mellon bought Lucas' rights for $400,000. In all $4,500,000
was put into the new company, of which $3,000,000 was paid into the treasury
for immediate. development needs.
Unwilling to let control slip from their fingers, the Mellon brothers retained
40 per cent of the stock, and to spread the risk, permitted six Pittsburgh
capitalists to subscribe for the remainer.//// They included William Flinn,
contractor and political boss of Pittsburgh, James H. Reed, father of the
future Keystone senator, J. D. Callery, traction magnate. W. L. Mellon became
vice president in charge of the Pittsburgh office, where control lay. Later a
$4,O00,000 bond issue was floated.
By May, 1900, when the J. M. Guffey Petroleum Company stock graced the Mellon
portfolio, frenzied speculation by the mob had given way to a desperate
struggle between powerful financial groups for a foothold in Spindletop.
Fortunately the old Gladys City lease, held by the Mellon company, covered
most of the dome. But it was advisable to appease important influences in the
Texas legislature able to hamstring the infant industry by unfavorable lease
laws and taxes. Ile Hogg-Swayne syndicate, in which Governor Jim Hogg was
interested, obtained the Page lease from Colonel Guffey.
"Northern men were not very well respected in Texas in those days," he
recounted later. "Governor Hogg was a power down there and I wanted him on my
side because I was going to spend a lot of money."
On the Page lease arose the Texas Company, later to rank next to Gulf Oil (the
rechristened J. M. Guffey Petroleum Company) as the leading independent.
Humble and Magnolia, subsidiaries of Standard, also date from Spindletop
leases
Everywhere on the "Big Hill," the name facetiously given the ten-foot
undulation rising from the flat plain, arose derricks. Other huge gushers came
in with mighty roars. The Guffey company brought in the National (Beatty) in
April, and eight more before the field was exhausted. Production, a mere
3,600,000 barrels in 1901, grew to 17,42i,ooo the next year, declined to half
that in 1902 and then dwindled to 1,650,000 in 1905.
Years later Dame Fortune gave her wheel another spin and played a dirty trick
on the Mellons. In 1920 Gulf Oil had given up its Gladys City lease except for
the dome, from which oil was coming in driblets. In 1922 a deeper hole sunk on
the flanks of the exhausted dome came in as a tremendous gusher, as mighty as
Lucas. Beaumont relived, in a measure, the thrilling days of 1900 while
astonished Gulf executives had to pay $140,000 cash and $60,000 in production
for one acre of the land they had given up but two years before as worthless.
After the Yugoslav prospector's lucky strike of 1900, every salt dome on the
Gulf Coast was seized upon by avid wildcatters and company agents. The great
speculative game of buying leases began in earnest. Ile Mellon company before
the end of the year had a million acres of Texas and Louisiana land under
lease, four wells in production, four more being drilled, and a 6-inch pipe
line under construction to Port Arthur. Within a few years oil from Sour Lake,
Batson, Saratoga, High Island and Damon Mound was flowing to Port Arthur,
where the S.S. J. M. Guffey and other tankers of the Mellon line bore the
refined oil to Staten Island and to Europe.
President Guffey's report for 1901 was highly gratifying. The company had sold
1,939,000 barrels of oil for $414,00o. The loss of $28,000, in view of the
chaotic conditions surrounding the infant company, was equivalent in its moral
effect to a 20 per cent cash dividend. In a way, too, one hand was washing the
other, for the Mellons' New York Shipbuilding Company was building a fleet of
tankers for the Mellons' J. M. Guffey company.
By 1904, the Gulf Refining Company, organized to refine and distribute the
6,500,000 barrels that had flowed from Spindletop and the 7,000,000 barrels
that had flowed from Sour Lake, boasted a daffy capacity of 12,000 barrels.
Another 6-inch pipe line was being built. The Mellon firm already was the
largest independent in the world.
Secrecy similar to Aluminum's surrounded the Guffey Company's financial
affairs. This was necessary, it was explained quietly, to keep greedy tax
officials of state, county and school districts from exacting exorbitant sums
from companies which apparently came by their wealth so easily. Cotton farmers
who wrung a few hundred dollars a year from their soil by arduous labor of
their entire families might easily become corrupted, too, if the profits of
the oil companies were revealed, and demand extravagant sums for the privilege
of drilling on their lands.
The Mellons prefer Mellon men, young men who grow up with the company. But
Colonel Guffey was an old dog who had learned his tricks in another school. He
was inclined to be contemptuous of bankers. His ideas were not trimmed to the
Mellon specifications. He was careless in accounts, something of a plunger, as
apt to be in debt as out of it. Old judge Mellon would have distrusted him;
certainly he would not have chosen him to head a Mellon enterprise. The
Mellons hadn't exactly chosen him, either. They found him in possession of
valuable rights to Spindletop, and took him along with Spindletop. A salt dome
could be purchased, old Colonel Guffey couldn't be, they discovered.
Other Mellon men found their politics in their pay envelopes. Theirs was a
discreet Republicanism-high tariff primarily�and used, when occasion demanded,
to see that the right kind of men were supported for public office. Colonel
Guffey was a Democrat. He loved the game of politics for its own sake: there
was little other nourishment in being a Democrat in Pennsylvania. He was never
so happy as when outmaneuvering fellow oil operators or enemy Republican vote
snatchers.
His broad-brimmed black hat, white mustache and flapping coat tails, seen in
Harrisburg, were the signal that mischief was brewing toward the plans of Boss
Quay to buy a Senatorship, or whatever else came up on the block in those days
of political pomp and glory. The legislature elected the United States Senator
and it was usually an occasion for lavish use of honorariums and retainers.
Colonel Guffey was laboring on behalf of the forces of righteousness to block
Quay's election. Some of his methods raised the eyebrow of an honest
constituent. "But, Colonel, Mr. Blank says you offered him $50,000 for his
vote." "Hell!" retorted Guffey, "I was only trying to keep him straight.
Quay's crowd had offered him $65,000."
After 1906 Guffey no longer headed the company named for him. "They throwed me
out," was the way he put it on the witness stand in 1926. W. L. Mellon was
advanced to the presidency and the Gulf Oil Corporation was formed as a
holding company for the Mellons~ diversified oil interests. George S. Davison,
efficient, hard-working, served as W. L. Mellon's right hand man. The new
combination worked infinitely more to the Smithfield Street banker's taste.
Twenty years later Colonel Guffey, aged veteran of sixty years' campaigning in
petroleum and politics, laid before an Allegheny County jury his version of
his ousting. He was suing for $142,000 with interest accrued since 19or which
he claimed the Mellons owed him. Either his claim was a meritorious one, or
the jury took pity on a penniless old man of 86, and voted him $348,695.33 for
satisfaction of the principal and interest he claimed.
The proceeds of the Page lease at Spindletop, sold to the Hogg-Swayne
syndicate, were legitimately his, Colonel Guffey claimed, as security on a
loan made to the Guffey Petroleum Company in its first year. The Page money
was to be paid him on "demand" when he returned to Pittsburgh, font of all
ready cash. But he was a man of varied and scattered interests, he forgot
about the Page lease, and failed to demand his money. He was reminded of it in
1920 by an old associate. Guffey found the original letter in his files,
presented it to R. B. Mellon, who referred him to A. W., who had handled the
early money transactions of the Guffey Petroleum Company. A. W. Mellon now had
his offices in Washington, D. C., whither the old man turned his steps. The
Secretary of the Treasury greeted him affably and promised to look into the
claim.
The Mellon version differed. Guffey had been paid the $38,000 on the Page
lease, together with other money owing him, in 1903, asserted W. L. Mellon. He
produced a statement which bore the notation "for payment in full." Guffey
contested that be had not noticed the "payment in full" notation. He had
accepted it as one of several payments which were made from time to time,
"believing that I was dealing with honorable people and that it was all
right."
The Mellon attorneys stuck to their record, and urged upon the court that in
any event the statute of limitations barred "demanding" 24 years later what
was on the face of it a short-term loan. Guffey in turn ridiculed the Mellon
claim that $38,000 represented payment in full on the Page lease. The Hogg-
Swayne syndicate had paid the Mellons $180,000, and he demanded now, even if
a trifle late, the $142,000 difference, with interest.
Interesting bits of early Gulf history�or fiction�came to light in the trial.
The J. M. Guffey Petroleum Company was organized at the Fifth Avenue Hotel in
New York, said Guffey, at a meeting attended by A. W. Mellon, H. C. Frick and
others. Secretary Mellon, on the stand, denied all memory of such a meeting
but said that on another occasion he had met with Colonel E. M. House of
Texas, financier, later to be Woodrow Wilson's ambassador-at-large, and T.
Jefferson Coolidge of the Old Colony Trust Company, regarding a bond issue. He
denied that Guffey had expected the Page lease from Spindletop property to be
turned over to the J. M. Guffey Petroleum Company, but he was hazy about the
settlement of the lease. Nor did he remember about the letters Colonel Guffey
left with him in Washington. "I get so many things down there that I can't
very well remember," be said.
By 1926 W. L. Mellon had become a man of wide affairs, it appeared. He was not
certain what his position was with Gulf Production Company, successor to J. M.
Guffey Petroleum Company. "My position with Gulf Production, I think, is
chairman of the board. I am not sure just how that organization-it is a
subsidiary of Gulf Oil Corporation, of which I am president." He told of a
conversation with Guffey, in which they talked over the "payment in full" note
at the time it was made.
"There's not a word of truth in that," bristled the old man, on the stand. His
eyes reflected the hatred in his soul against the Mellons as they testified.
"How can you beat perjury like that?" he muttered. "And it means so much to me
and so little to them!"
The jury's verdict for Guffey was set aside and a new trial. ordered. David A.
Reed of Reed, Smith, Shaw & McClay led the defense in the second trial. The
judge took the case from the jury's hands and directed a verdict for Gulf.
Guffey's attorneys appealed, but the case was never pressed. A few years later
the old man died in a house which he fondly believed to be his own.
John D. Rockefeller's bland, "This business belongs to us," was a bit
ridiculous after the discovery of the Black Golconda in Texas. Big
aggregations of capital-Gulf, Texas, Humble-were arising overnight, far from
the reach of Standard's monopolycompelling refineries and pipe lines.
Companies quick in the first few years in the Texas fields entrenched
themselves with their own pipe lines and their own refineries before Standard
could crush them to earth.
Yet Standard's advantage lay in the possession of an incomparable organization
and market outlets the world over. Within a few years a gentleman's agreement
had been reached. A few companies, too big to be elbowed out of the way, would
be permitted by Standard to share in its monopoly on the condition that
Standard lead always in setting the price on oil. So it came about that the
American Oil Empire changed from a simple autocracy into an oligarchy in which
Standard was supreme but shared power with three or four companies. They
deferred to the chief but insisted on their own portion of the loot.
The mechanics of monopoly remained the same. As new fields were discovered
further inland, the pipe lines of the major companies slithered in from
Sabine, Port Arthur, Galveston Bay and !Corpus Christi. Charles H. Wrightsman,
spokesman for the small producers in Oklahoma, explained the technique to the
House Committee on interstate commerce in 1914:
"Now we have two independent lines [in Oklahoma]. One is the Texas Company,
founded by Gates, and the other is Gulf, owned by the Mellons of Pittsburgh.
They are two very remarkable institutions. Prairie Gas & Off [Standard] has in
every instance except one taken the-initiative on increasing or reducing .the
price and within 24 hours the two so-called independents have followed suit."
If one of the big companies were embarrassed by a temporary surplus of oil, a
supposed rival kindly took it instead of forcing the competitor to build its
own storage tanks or increase its pipe lines. As for the small producers, "we
never sell our oil, we just simply take what the pipes pinch off to us. They
have absolute domination of the market."
Playing with the little fellows was an amusing game. They would open a new
field and appeal for a pipe line extension to take away their wealth. "Well,
boys," the major-domo from Fort Worth or Tulsa would say, "there's not nearly
enough here yet to justify sending in a line. Mighty expensive, you know. Now
if you can show me a 100 per cent increase in production in the next few
months, we can do something for you."
The little fellows rush more wells. The quota is attained. Soon the ditching
machines come in sight of the field. Following the mechanical digger, opening
1,320 feet an hour, the pipe welding apparatus lays the pipe, and a third
machine covers the trench. Loud huzzas greet the arrival. Storage tanks are
ready to debouch their black gold. Months of arduous toil are to be rewarded
at last.
The "big shot" arrives. "Just as glad as you are to see this field connected,"
he says. "But you've certainly got a whale of a lot of oil here. Guess that's
what's depressed the market lately. Sorry we can't pay the $1-05 we thought we
could." And the price tumbles, sometimes as low as 50 cents.
The Federal Trade Commission used to sit in hearing on these and other
practices to which the little fellows objected. But it never seemed to help
much. The major companies were polite, discreet, usually silent. Dissolution
orders, perpetual injunctions, cease and desist mandates tumbled from the
Supreme Court, the Department of justice and the Federal Trade Commission. The
big companies were unworried, even when the trade commission recommended to
Congress that the pipe lines be divorced from their control. Even a divorce
could hardly establish platonic relations between two companies with the same
owners.
The Government soon found more important affairs with which to concern itself
than the defense of the little fellows. The world must be made safe for
democracy. The little fellows would have to wait until that job was done. By
the time the Government had achieved that end, it was too late to do anything
about the little fellows at home.
Oklahoma, aiding its small producers, was trying to force the big companies
owning pipe lines to live up to the law of 1906 which declared them common
carriers. Gulf executives, along with Standard and Texas, were amused by the
law. At first no effort was made to comply with it; later when the U. S.
Supreme Court upheld its validity, the companies announced that 100,000
barrels would be a minimum shipment. No small producer could ship that
quantity. Later when the Interstate Commerce Commission ordered a
10,000-barrel minimum, the companies fixed remote stations to which the off
must be delivered.
When every letter of the law had been complied with, the spirit was still
evaded by high charges for pipe line use. Gulf oil didn't care what price Gulf
Pipe Lines charged it for carrying oil. It all stayed in the family anyway. So
the price from the Cushing field in Oklahoma to Port Arthur was boosted to 40
cents a barrel. The cost of shipment was only 16 cents.
It was out of the question of course for independents to build competing pipe
lines. That cost $9,000 a mile. The field in which the little fellows were
operating might be exhausted before the line to the seacoast was paid for. The
big companies had an enormous advantage, too, in that they didn't have to
build a complete line to the seaboard for every new field. A feeder was
usually enough.
Pipe lines were enormously profitable. By 1916 Standard and its allies were
receiving 41.5 per cent a year on their pipe line investments. The Mellon
company boasted a 35 per cent return in 1911, 22 per cent in 1912 and 27 per
cent in 1913, when $1,921,000 was earned on an investment of $7,126,000.
By 1920 the 2,532 miles of Gulf lines represented an investment Of $29,000,000
and were carrying 28,000,000 barrels a year from the major fields of Oklahoma,
Texas and Louisiana at 27 cents a barrel. Seven years later the network had
spread out to 4,800 miles, valued at $55,000,000, carrying 83,000,000 barrels,
and serviced by 2,100 workers. Gulf Pipe Lines of Oklahoma had just declared a
$5,000,000 dividend or 500 per cent on its stock.
Fortunately the Mellons were not obliged to part with much of the $5,000,000.
Their associates of 1900 had long since been bought out and Mellon ownership
of the parent corporation's stock was reported to be more than 80 per cent of
the $108,000,000 total. Gulf Oil had become a gusher of gold which made Lucas'
oil gusher seem puny.
pps. 93-108
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kri
DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance�not soapboxing! These are sordid matters
and 'conspiracy theory', with its many half-truths, misdirections and outright
frauds is used politically by different groups with major and minor effects
spread throughout the spectrum of time and thought. That being said, CTRL
gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://home.ease.lsoft.com/archives/CTRL.html
http:[EMAIL PROTECTED]/
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]
To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]
Om
