By Patrick Allitt, Emory University
A vital commodity in American industrialization was the oil industry. Earlier, oil had to be taken from whales, which wasn’t ideal. After discovering rock oil, John D. Rockefeller built an empire and reintroduced the oil as we know it today. By making the oil industry a modern version of the American monopoly, Rockefeller contributed to American industrialization beyond words.
Fuel Before Rock Oil
Before 1860, the principle source of oil in America was from whales. The oil was used as an illuminant, that is, as lamp fuel. Catching the whales was an extremely difficult business that could take up to three years. The ships would spend months, even years, trying to find the schools of whales before hunting them in an attempt to take off their skin. The skin would then be heated and melted so the oil from it could be used as lamp fuel.
A long, complicated, and very dangerous business indeed. It’s no wonder that as soon as a safer and superior method of oil production was developed, America should very rapidly have switched to it.
The First Breakthrough in the Modern Oil Industry
In 1859, George Bissell and Edwin Drake discovered that it was possible to get oil from the ground by drilling using a salt drill. At the time of their discovery, they were in Titusville, Pennsylvania.
Following their discovery, gushers of crude oil were coming to the surface. The oil was difficult to refine in the early days, and an enormous amount was wasted. There was a simple technique: boiling the oil, taking off the thin compound, called kerosene, at the top, and using that as a lamp fuel. The rest of the oil was mainly dumped.
California Gold Rush vs. Pennsylvania Oil Rush
Large-scale exploits of rock oil, or the Pennsylvania oil rush, took place 10 years after the California gold rush. The California gold rush was in 1849, and the Pennsylvania oil rush was in 1859. Although it’s less well-known historically, the product of the Pennsylvania oil rush was really of far greater value.
Just as in the gold rush, at first, it was possible to go to the site and very quickly make a fortune by exploiting resources that were easy to get at. It wasn’t long, though, before you needed capital equipment to dig more deeply and develop it on a more systematic industrial basis.
This is a transcript from the video series A History of the United States, 2nd Edition. Watch it now, on Wondrium.
John D. Rockefeller: Founder of the American Oil Industry
John D. Rockefeller started in New York and came to Cleveland for business opportunities. He got into the oil refinery business. Rockefeller was an expert organizer and very innovative in his business techniques. That’s what really makes him an important person in American business history.
Rockefeller established refineries. He worked very hard to make a high-quality product that consumers could have confidence in. Then, he tried to buy out his competitors or go into partnerships with them.
One of his techniques for overcoming competitors was to persuade the railroads shipping the oil to give him a secret rebate on his shipping charges and could get away with it. Why? Because of the sheer scale of his operations, which increased very, very rapidly in the 1860s and the early 1870s.
Standard Oil: An Aspiration of Greatness
Rockefeller named his company Standard Oil, and the idea of the name was that it set the standard to which all other competitors had to aspire. By the 1870s, he’d created what was really something fairly close to a monopoly of American oil refining. About 85 or 90 percent of American crude oil was being refined in Rockefeller-owned or Rockefeller-influenced refineries.
Rockefeller was also a pioneer of vertical integration. While concentrating first on the refineries, it wasn’t long before he was becoming involved in the ownership of the oil fields and then ownership of all the distribution so that every stage of the oil business gradually came into his own hands. He didn’t have to pay profits out to anybody else.
Flawless, Abundant, and Affordable
Rockefeller cared for product quality. In the early days of kerosene lamps, one of the hazards was that impurities would catch fire and explode. He found a way to make a high-quality product where explosions and, hence, house fires were much less likely.
As he developed the business on a massive scale, he was gradually able to reduce the price he had to charge consumers. By 1900, kerosene only cost about 30 percent of its cost at the time of the Civil War, showing a steady decline in price and a steady rise in the quality of the product. That was the basis of Rockerfeller’s enormous success in business.
Further Expansions into the Auto Industry
In the 1890s, the first automobiles were developed, and early pioneers tried all sorts of ways of fueling. Some of the very early cars were steam-driven. A few of them even ran on pollen powder.
However, it wasn’t long before oil, which was abundant, volatile, and suitable as a fuel, became the standard way of fueling motor vehicles. Thus, having created an empire on illuminants, Rockefeller was able to convert to the auto industry, which of course, enjoyed an immense expansion over the first half of the 20th century.
Common Questions about John D. Rockefeller and the American Oil Industry
Before the time of rock oil, the main supply of the U.S. oil industry was whale skin. Maintaining large quantities of whale skin was time-consuming and costly. And the more whales were killed, the less and more expensive whale oil became. When rock oil was discovered in America, it quickly replaced whale oil.
After founding Standard Oil, Rockefeller immediately began eliminating his competition. He either bought out his competitors or entered into partnerships with them to control them more easily. He also persuaded the railroad companies that transported his product to give him secret transportation discounts.
In 1859, George Bissell and Edwin Drake discovered sources of rock oil in Titusville, Pennsylvania. Following their discovery, the large gushers of crude oil coming to the surface could be collected. The Pennsylvania oil rush changed our perception of oil and its sources, giving us the opportunity to create an oil industry that would later become a key element of American industrialization.
