Standard Oil Trust Controls 90% of U.S. Oil Refining - Monopoly Power Peak

By the end of the 1890s, the Standard Oil Trust controls the refining of 90 to 95 percent of all oil produced in the United States, representing the most complete industrial monopoly in American history achieved through systematic elimination of competitors, strategic mergers, and exploitation of favorable railroad rebates. Founded in 1870 by John D. Rockefeller in Ohio, Standard Oil achieved dominance by 1880 and formalized as a trust in 1882 through the Standard Oil Trust Agreement signed by nine trustees including Rockefeller. The trust agreement allows companies to be purchased, created, dissolved, merged, or divided at trustees’ discretion; eventually the trustees govern approximately 40 corporations, of which 14 are wholly owned. Though the Ohio Supreme Court dissolves the trust on March 21, 1892, the holdings reorganize into 20 independent companies forming an unofficial union referred to as “Standard Oil Interests” that maintains monopoly control through coordinated action.

Standard Oil’s monopoly rests on anticompetitive practices that become templates for corporate power: negotiating secret rebates with railroad companies in exchange for guaranteed high-volume oil shipments (60 carloads daily), allowing Standard to transport oil at significantly lower costs than competitors and systematically driving them out of business. Rockefeller pioneers “drawbacks”—requiring railroads to pay Standard Oil fees for transporting competitors’ oil, ensuring that even when rivals manage to ship products they indirectly enrich Standard Oil. The 1872 South Improvement Company scandal exposes Rockefeller’s secret railroad agreements giving Standard exclusive rebates while forcing competitors to pay higher rates, triggering public outrage and political pressure that dissolves the South Improvement Company but doesn’t end the underlying rebate practices. Despite the Interstate Commerce Act of 1887 specifically outlawing railroad discounts, Standard Oil continues receiving preferential treatment through informal arrangements that regulators prove unable or unwilling to stop.

The trust’s dominance during the McKinley era (1896-1901) demonstrates the failure of antitrust enforcement: Congress passed the Sherman Antitrust Act in 1890 by overwhelming margins (Senate 51-1, House 242-0) to forbid contracts, schemes, and conspiracies restraining trade, but the law’s vague language about “restraint of trade” and lack of enforcement resources render it largely ineffective. The McKinley administration, funded by Standard Oil’s $250,000 contribution to Mark Hanna’s unprecedented corporate fundraising operation, takes no meaningful action against the oil monopoly or other trusts. Standard Oil exemplifies how campaign contributions purchase regulatory capture: the same corporation financing McKinley’s election expects and receives protection from antitrust enforcement. The monopoly persists until journalist Ida Tarbell’s 1902-1904 investigative series in McClure’s Magazine detailing how Rockefeller “ruthlessly forced his competitors to sell or perish” through railroad discounts and other illegal practices creates public pressure that eventually leads to the 1911 Supreme Court decision dissolving Standard Oil into 34 companies. The Standard Oil case establishes the pattern of monopoly power enabled by regulatory capture, where dominant corporations use political contributions and influence to prevent enforcement of laws designed to restrain their market control.