The Legacy of the Breakup of Standard Oil

In 1870 John D. Rockefeller co-founded the Standard Oil Company. The company (or “Standard” for short) would grow over the coming decades to be one of the largest businesses in the US at the time. It would eventually meet it demise, though the breakup of Standard Oil still has a lasting effect on the modern world.

Rockefeller grew Standard through a number of different ways; some more dubious than others. He was incredibly innovative and found ways to increase productivity and efficiencies through economies of scale and vertical integration. In an era of wildly fluctuating oil prices, he was able to reduce prices and ensure more standardized pricing for consumers.

Other methods of his were more dubious. Rockefeller was a shrewd businessman and used every advantage available to him. Secret deals for favorable shipping from railroads and refineries helped Standard to absorb smaller competitors. Using vertical integration, he could also threaten the oil supply to competing refineries if they did not make a deal with him. In some cases there was even documented bribery of legislators.

Nevertheless, by 1904 Standard Oil had grown so large that it controlled 91% of all oil production and 85% of final sales in the US. The size and market share of Standard Oil began to draw the ire of the American public and legislature.

As a result of the growing discontent of the monopoly-like power, a federal lawsuit was filed against Standard Oil under the Sherman Antitrust Act in 1906. After Standard appealed the unfavorable result, the Supreme Court upheld the decision in 1911. The company was forced to dissolve as an entity.

The Legacy of the Breakup of Standard Oil

The Legacy of the Breakup of Standard Oil chart

Later that year the company split into 34 different independent companies. The split was mainly based on geography so the companies did not have to compete heavily with each other. Seven of the biggest companies to form from the split are highlighted in the chart. As you can see, these companies now comprise of some of the biggest energy providing companies in the world.

Standard Oil of Kentucky was eventually acquired by Standard Oil of California in 1961. They were renamed as Chevron and eventually merged with Texaco in 2000, though kept the Chevron name.

Standard Oil of New York and Standard Oil of New Jersey were two of the largest companies in their own right. Each had a few mergers of their own, and renamed themselves Mobil (NY) and Exxon (NJ). In 1999 the two companies merged to form ExxonMobil.

Standard Oil of Indiana and the Standard Oil Company (Ohio) were later renamed Amoco and Sohio, respectively. Both were bough by British Petroleum (BP) at the end of the 20th century. The Ohio Oil Company was later renamed Marathon. They are now known as Marathon Petroleum – the largest petroleum operator in the US.

As you can see, the legacy of Standard Oil lives on today in some of the worlds largest energy companies. These companies are what helped guide the US through the 1973 Oil Crisis. While also growing to be powerhouse companies, they also made Rockefeller fabulously wealthy – as he owned nearly a quarter of each of the spin off companies.

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Source: Visual Capitalist

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