Chapter IX: The Trust in America and Asia

Hitherto we have been dealing with the history of the Standard Oil Trust on its native heath, the United States of America. It is now time to pass in brief review some of its operations in foreign countries. It appears in many lands, this Protean conspirator, and always in some new guise. Here it is the pioneer and prophet of native oil; there it is the importer of vast floods of foreign oil. Itself protected by a heavy tariff in the United States, it poses in other lands as the chief of the apostles of free trade. It demands alike freedom to enter foreign oil-fields as a prospector and foreign oil markets as a retailer. In one country it is the advocate of high prices; in another it is the ruthless undercutter of its competitors. Always preferring secrecy to daylight, its underground agitations embrace the Press, the politicians, and the public. It is not always easy at first to discover who is behind a Standard oil agitation, but I shall give a few clues which may assist the student of oleaginous origins.

Turning first to Mexico, we find that the Standard’s operations there have been conducted under the name of the Waters-Pierce Oil Company of Missouri, which is now after many years of falsehood admitted to be a tentacle of the Trust. The history of the re-entry of the Waters-Pierce Company to the State of Texas is a good example of the Standard’s methods. There sits in the United States Senate one Joseph Bailey, a Democrat of the deepest dye. A lawyer, an orator, one of those pure-souled patriots who denounce in public the trusts and monopolies, Senator Bailey was exactly the man the Standard wanted. The full facts are given by Miss Ida M. Tarbell in an article in the _American Magazine_ for January, 1908. The Texas Legislature passed a sweeping anti-Trust law; under it the Waters-Pierce Company was prosecuted from court to court until finally in March, 1900, the United States Supreme Court sustained the decisions of the Texas courts, and the Company was ordered to close up its business and get out. At this point Senator (then Congressman) Bailey appeared, and for a fee of $3,300 (charged on the Company’s books to “profit and loss”) succeeded in obtaining from the Democratic Attorney-General of Texas two months’ grace. The Waters-Pierce Company finally transferred itself to a new Company of the same name, which took over the entire business of the original company, and Mr. Henry Clay Pierce, the manager, applied for a charter for the new one. He swore that it was in no way connected with the Standard Oil Trust, and that he owned 3,996 out of 4,000 shares. Largely through the influence of Congressman Bailey the new charter was granted. Four weeks later Bailey, who was always regarded as a poor man, was able to buy the splendid Grape Vine Ranch at Dallas, Texas, of 6,000 acres--a singular coincidence, to say the least.

The new Waters-Pierce Oil Company went on trading until in the Missouri proceedings in 1906 Mr. Henry Clay Pierce, the managing director, was at last forced on to the witness-stand. He there admitted that he only owned 1,250 shares of the new Waters-Pierce Company, and that the Standard owned 2,750. He admitted quite frankly that in order to evade the anti-Trust law of the State of Texas the Standard’s 2,750 shares stood on the books in his name from May, 1900, to September, 1904. During this period the dividends were sent to Mr. Bayne, of the Seaboard National Bank of New York--a gentleman whose name my readers will recall as appearing in connection with the Standard’s carefully concealed ownership of the Security Oil Company of Texas. In June, 1904, Mr. H. C. Pierce was asked to transfer these 2,750 shares to Mr. Van Buren, who happens, oddly enough, to be the son-in-law of Mr. J. D. Archbold, whose name has appeared so often in previous chapters.

During all this time that the Waters-Pierce Oil Company was posing as an “independent” business it was carrying on a very large and profitable trade in the adjoining Republic of Mexico. Although there are large natural deposits of petroleum in Mexico, the Waters-Pierce Company preferred to import crude oil from Texas and Oklahoma, refine it in Mexico, and sell it at a price which returned a profit of 600 per cent. on the invested capital. But the Mexican Government desired to develop the natural resources of the Republic, and as they were quite tired of the high prices of the Standard, which had a monopoly, they granted large oil concessions to the Pearson interests, which are headed by Lord Cowdray. The Pearson firm had executed large railway, waterworks, and harbour contracts for the Mexican Government, and they developed the petroleum resources of Mexico so rapidly that the Standard, which was hampered by a duty of $4½ a barrel on all the crude oil they imported, soon began to feel the pinch.

Then ensued the rate-war which lasted so many months in Mexico, but which is reported to be now compromised. The Waters-Pierce Company built a refinery in Mexico, and spent large sums in buying Mexican oil lands. They cut prices so heavily that they sold oil under cost, but the natural advantages of the Pearson interests were so great as to render them impregnable, and the Eagle Oil Company was successfully launched on the London market by Lord Cowdray’s firm to carry out extensive developments on the oil-bearing lands they own. During the bitter contest there was plenty of evidence of the existence of the Standard’s Press bureau, the head of which gets the liberal salary of $12,500 a year. Articles appeared in London financial newspapers predicting the imminent ruin of the Pearson interests, and obviously intended to stop the English investor from backing their flotations. According to a statement recently published in the United States, a more subtle campaign seems to have been carried out against President Diaz, who favours the Pearson interests. Many officials of the Government, including a son of President Diaz, have become shareholders of the Pearson local oil company, being naturally desirous of developing their national resources and of fighting this American monopoly. Now under the title of “Barbarous Mexico,” an ostensibly humanitarian campaign was opened in newspapers and magazines of the United States of America against the alleged harsh treatment of the Yaqui Indians by the Mexican Government. In the _Cosmopolitan Magazine_ of March, 1910, it was categorically asserted by Mr. Alfred H. Lewis, one of the foremost American magazine writers, that this campaign had been inspired by the Oil Trust. They were determined to be revenged on President Diaz, and therefore they induced a number of well-meaning Americans--who haven’t time to put down the public lynching of negroes in the United States--to plead the cause of the unfortunate semi-enslaved Yaqui Indians. I cannot prove this charge, but Mr. Lewis says it is believed by Americans resident in Texas and Mexico. From the nature of the case this allegation is difficult to substantiate, but for the present purpose it is a sufficiently significant fact that a writer of Mr. Lewis’s reputation should believe that such a Machiavellian scheme is possible. That the Standard will stick at nothing appears from the fact that when Lord Cowdray visited New York in June, 1910, he was shadowed by their detectives. The Standard Oil Trust issued a formal denial of this charge, but Lord Cowdray repeated it and reaffirmed it in the _Daily Mail_.

Turning next to Canada, we find that the British flag has been no protection against the Standard’s invasion. Here, too, railway discrimination was the principal weapon employed, and this was aided by the legislation which the Standard obtained at Ottawa permitting them to ship their oil along the international waterways and the Canadian canals in bulk steamers to Canadian ports, where it was easy to transfer it to tank cars. In 1898 the late Mr. Henry D. Lloyd, author of “Wealth Against Commonwealth,” wrote as follows to the present writer with regard to these discriminations:--

My information came direct from the attorney of one of the principal
Canadian refiners. This refiner carried on his business with my book
at his elbow, and he told his attorney that precisely the things that
I had exposed in that book were there and then being done to him.
The discrimination was managed by some manipulation of the rates
with regard to shipments in barrels. The Oil Trust had barrelling
works of its own at certain points, from which it received rates at
discriminations that killed the profits of the home refiners who
did not have these central stations. The refiner I speak of was
prosperous, liked the business, and would have continued in it but
for this railroad discrimination. He made every possible effort by
appeals to the railroad people in Canada to remedy the wrong, but
found them as determined to favour the American Trust as railroads in
the United States.

Finally the Standard clinched the matter by purchasing a Canadian refinery, which it runs as the Imperial Oil Company, a nice patriotic sort of name which no doubt appeals to the Canadian public. With this refinery and the railroad discriminations they are as powerful in Canada as they are in the United States.

When one turns to the Far East it is surprising to discover that the Standard has not had things all its own way. It does a huge business in China and Manchuria in case-oil, but it has there had to fight, first, Russian oil shipped in bulk, and, when that fell off, the competition of the Dutch East Indies. Several of these islands are very rich in petroleum, and, in my opinion, its failure to secure a footing there was the Standard’s first great defeat. The story is told with commendable bluntness and candour by Mr. Robinson, British Consul at Amsterdam, in his annual report for the year 1897 (Foreign Office Consular Reports, No. 2,054). He says:--

At present a very important question has been raised by the attempt
of the well-known American monopolist undertaking, the Standard
Oil Company, to acquire a footing in the Dutch East Indies by the
purchase of the shares of the Moeara Enim Company, an important
concession in Sumatra. An extraordinary general meeting of the latter
company was to have been held in the last days of February for the
purpose of ratifying the agreement with the Standard Oil Company, but
the Dutch Government has interfered by the categorical declaration
that no concession will be granted to a company under the control of
the American monster monopoly, and the meeting has naturally been
postponed. It remains to be seen whether the financial power of the
Standard Oil Company can be effectively resisted by such steps, but
the Government seems quite determined to use all possible means to
this end, and the course which it has adopted will certainly be a
popular one, threatened as Netherland India is by an “imperium in
imperio” of this description. The agitation against the Standard
Oil Company’s monopoly, in so far as this inflicts on this country
all the dangers and disasters caused by an exclusive supply of
low-flashing oil, is a constantly increasing one.

The result was that the Moeara Enim Company were unable to sell, and the Standard has never been able to get into the Dutch Indies. Worse still, the Moeara Enim and two other Dutch petroleum companies were absorbed by the Royal Dutch Petroleum Company, and this in its turn became in 1907 allied with the Shell Transport and Trading Company of London, of which Sir Marcus Samuel is the head.

Briefly, the present position is that two new companies have been created, in which the Royal Dutch and the Shell Company hold all the shares. The Bataafsche Petroleum Maatschappij is a Dutch company with a capital of 80,000,000 florins, which carries on all the pumping and refining operations of the combine in the Far East, while a new English company, the Anglo-Saxon Petroleum Company, with a capital of £4,000,000, owns all the petroleum fields in which they operate, and also the very large fleet of tank steamers formerly owned by the Shell Company, in which their products are carried. They send into London alone 80,000 tons of petroleum spirit annually through the Asiatic Petroleum Company, their marketing agents. Last year the same combination sent 10,000,000 gallons of this motor spirit into the United States, supplying firms who were competitors of the Standard Oil Trust. In 1909 the Royal Dutch-Shell combine took over the business of many of their agents. For this purpose the Shell Company provided additional capital amounting to £440,000, the Royal Dutch put up £660,000, and the Asiatic Petroleum Company £200,000, making an additional outlay of £1,300,000 for one branch of their business. A large Roumanian oil company, the Astra, has been secured, and the Shanghai-Langkat Company, which operates refineries in Borneo, has also been bought out since the amalgamation of 1907. That amalgamation has apparently been profitable to those engaged in it, for the Shell Company’s dividend, which had been only 5 per cent. per annum between 1903 and 1906, rose to 15 per cent. in 1907, 20 per cent. in 1908, and 22½ per cent. in 1909.

Now the awkward part of this chain of events so far as the Standard is concerned is that the whole petroleum world has been turned upside down by the motor engine. In 1897 Mr. Paul Babcock, director of the Standard, told the Select Committee on Petroleum that they had in New York tanks full of naphtha which they could not sell. Mr. Bergheim, a well-known Galician oil producer, told a City meeting the other day that he could recall the day when his firm gave the naphtha to any one who would take it away. Then the Standard with its control of the tank installations and the selling agencies for reaching the consumer of illuminating oil (or kerosene) was the master of the world. Now the consumption of kerosene is threatened by electricity among the rich and slot-gas meters among the poor, and it is the despised naphtha (or benzine) which is in demand. Motor-cars, motor-cycles, motor-omnibuses, motor-lorries, aeroplanes, all these engines are demanding petrol, and it is the good fortune of the Shell combine that its crude oil provides a larger percentage of benzine than the Standard’s American. While huge quantities of benzine, for which there is an increasing demand, are being sent to Europe by the Shell combine, the Standard is left with its monopoly of kerosene, for which the demand is decreasing. At the same time, the Sumatra and Borneo crude produces a very profitable percentage of petroleum wax, for which there is also an increasing demand, and there is a big market for the residue all over the Far East as fuel oil. This is the real secret of the recent “oil war,” which has broken out chiefly because the Standard finds its supremacy challenged by wealthy and vigorous competitors, and is trying to use its vast accumulated profits in a “rate-cutting” war. The latest news in this connection was the intelligence that the Standard is attempting to repair its initial failure of thirteen years ago by obtaining petroliferous areas in Java and Sumatra. It proposes to do this through the medium of the Holland-American Petroleum Company of Amsterdam, which being nominally a Dutch company can legally acquire this property. Whether the Dutch Government which took so strong a stand against the Standard’s invasion in 1897 will consent to be fooled by such an obvious device as this remains to be seen. But the fact that the scheme has been initiated indicates the desperate straits to which the Standard is reduced for benzine.

This is not the first time the Standard has come into collision with the Shell. In September, 1904, the _New York Herald_ published an interview with Mr. W. H. Libby, the foreign marketing agent of the Standard in New York. This was a long “puff” of the Standard, and contained the allegations that in the “rate-cutting” which had then been going on the Shell Company had been reduced to serious financial straits, and were selling oil falsely branded. As these allegations were entirely false, the Shell Company brought an action against the _New York Herald_ in the English Courts for libel, which ended in 1905 in a complete victory for the victims of Standard Oil calumny. Mr. J. Eldon Bankes, K.C. (now Mr. Justice Bankes) stated on behalf of the defendants that they had made inquiries into the matter and found that the statements could not be substantiated, and therefore withdrew, apologised, and paid the plaintiff’s costs as between solicitor and client. As we proceed we shall find other points at which the Standard and the Shell have collided, but the vital factor in the present oil situation is the Sumatran benzine, which the Rockefellers failed to secure in 1897.

Passing to India, the Standard had to fight for years with the Russian oil exported in bulk through the Suez Canal, and is now pressed hard by the Burma Oil Company, an undertaking mainly under Scotch control, which has until recently had a monopoly of the Burma oil output. As there is a tariff on American oil in India from which Burmese oil is exempt, it was obviously to the interest of the Standard--which thoroughly believes in tariffs at home--to get behind that obstacle by being able to refine Burma oil and vend it in India. There is another reason, and that is the large percentage of petroleum wax which the Burma crude contains. There is a large and increasing demand all over the world for wax, which is used for candles, chewing-gum, the water-proofing of fabrics without rubber, and for many other commercial purposes. In its desire to get a footing in this promising field the Standard Oil Trust applied to the Indian Government for an oil-prospecting licence in Burma, and was much grieved when the Indian Government refused it. We come across that same Mr. W. H. Libby flitting about India. In November, 1902, the Calcutta correspondent of the _Financial News_ reports that this gentleman was trying to induce the Bengal Chamber of Commerce to support his little scheme against the Indian Government. The correspondent gives us a pretty picture of Mr. Libby’s virtuous protestations:--

The representative of the Standard Oil Company seems to wish the
Bengal Chamber of Commerce to believe that the motives of his
Company were not wholly mercenary--that, on the other hand, they
were philanthropic, inasmuch as he says that “it was the intention
of the Standard Oil Company to encourage as many Burmese natives
as possible to enter the producing business, by aiding them in the
employment of modern machinery and modern methods, by providing them
with an immediate cash market for their crude oil, and by loans,
if necessary, at very moderate rates of interest, to the end that
production might be stimulated and an important industry created. The
Standard hoped to derive its own profits by economies in refining,
by materially improving the quality and value of the manufactured
products, and by distributing the said products in India and other
Oriental markets, where aggressive efforts might largely increase
existing consumption.”

We know, of course, that the Standard has always been willing to encourage other people to undertake the risks of oil-well sinking, but the idea of stimulating this speculative business for the benefit of the natives of a semi-barbarous country is novel as well as captivating. When Mr. Libby’s campaign failed in India he came to London, and his claims were pressed on the India Office by the United States Ambassador in London, the Hon. Joseph Choate. As the Ambassador had often appeared for the Standard when at the American Bar, and as he had himself once stated that he was a shareholder in the Trust, we may be sure that his advocacy of the Standard’s schemes in Burma did not lack either zeal or ability. But it failed, and the Trust cannot get into Burma. The imports of all classes of oils from Burma into Madras Presidency during 1909–10 amounted to £317,868, as compared with £212,982 in 1908–9. In the same period the imports of American oils decreased from £241,128 to £189,362.

RUSSIA, GALICIA, AND ROUMANIA

“One of our greatest helpers has been the State Department in
Washington. Our ambassadors and ministers and consuls have aided to
push our way into new markets to the utmost corners of the world.”

JOHN D. ROCKEFELLER _in_ “_Random Reminiscences_.”