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How was Rockefeller able to become so successful in the oil business?
John D Rockefeller began as a humble oil business book-keeper in Cleveland, Ohio and in just seven years rose to control a tenth of the entire US oil business. In the late 19th century the oil industry was a free-for-all, [ the law of the jungle ruled. Rockefeller used this 'individual freedom' to pursue several extremely successful and deceitful tactics to accumulate capital. He would
secretly buy up or create new oil related companies such as engineering and pipeline firms. These seemed to be independent operators. Rockefeller and his close colleagues secretly controlled the firms and gave Standard Oil, Rockefeller's main oil company, hidden rebates. Another tactic was to buy up a competing oil company, again secretly. Officials from this company could then be used very effectively to spy on, and give advanced warning of, deals being hatched by his real competitors. Almost certainly the most lucrative secret deals done by Rockefeller and his partners were with the railroads. These 'in harmony' deals meant those refineries and oil traders not 'in harmony' with standard would find that railroads would refuse point blank to move their oil, whatever the price. Oil, of course, is free at source, so once the investment in refining and extraction plant has been made the only really important cost was transportation. Rockefeller's secret railroad rebates on the transportation of his oil kept his competitors guessing for years. None of them could understand how he kept pump prices so low. They were all bemused that Standard Oil had being growing at such a rate. How he managed to persuade the railroads to give him rebates and keep the deals secret is still not clear. Allun Nevins has produced an official biography¹ of the Rockefeller empire but even he cannot help but question its morality. Of a railroad contract signed on 17 October 1877 he says, "The commission was excessive for the services performed. ]
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Asked 7/25/2011 7:03:24 AM
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