CHAPTER XI
SONG OF THE BARREL
Geniuscould take so unspeakable a thing as a shirt and sing it into an immortal song, but a barrel—and an oil-barrel, greasy and ill-smelling—even genius could do nothing with that. But the barrel plays a leading rôle in the drama of the great monopoly. Out of it have flown shapes of evil that have infected private fortunes, the prosperity of more than one industry, the fiduciary honor of great men, the faithfulness of the Government to its citizens. Perhaps a part of what genius could do for the shirt—force a hearing for the wronged—may be done for this homely vessel of the struggling independent by the kindly solicitude of the people to learn every secret spring of the ruin of their brothers.
The market—the barrel that went to market—the freight rate that stopped the barrel that went to market—the railway king who made the rate that stopped the barrel that went to market—the greater king who whispered behind to the railway king to make the rate that stopped the barrel that went to market—this is the house that Jack unbuilt.
Such is the superiority of a simple business organization, where "evolution" has not carried the details of the industry out of sight of the owner, and where the master and man, buyer and seller, are in touch, that the independent refiners could overcome the tax imposed on them by this pooling of the pipe line and the railroads, and not only survive but prosper moderately. During the three years—from 1885 to 1888—following the first attack upon them under the contract just described, they state, in their appeal to the Interstate Commerce Commission in 1888, they were "enabled by their advantages in the local markets to keep up, maintain, and even increase their business."[227]These "outsiders" shipped their oil largely in barrels because the trunk-lines had made it as nearly impossible as they could for them to ship in tank-cars. They, like all in the trade, could not live without access to the European market. Out of every hundred barrels of various kinds of products from the distillation of petroleum, forty are of an illuminating oil not good enough to be burned in this country. It must be sold in Europe or not sold at all; and a manufacturer who cannot get rid of 40 per cent. of his product must give up manufacturing. To destroy the barrel method of shipment would destroy those who could use no other; and to close their outlet to Europe would make it impossible for them to continue to manufacture for the home supply. The barrel was the only life-raft left to the sinking independent.
They who had planned the secret pool of 1885 between the pipe line and the railroads, and the further advance of rates by both in 1888, now called upon the railroads to deliver a final stroke against the independents.[228]The railroads, when directed in previous years to say "no" to applications for transportation, and "no" to those who wanted the right to put their own tank-cars on the road, had obeyed; they obeyed again.
A pretext for the suppression of the barrel was easily found. It was a poor one, but poor pretexts are better than none. When the future "trustees" of the "light of the world" were doing a small fraction of the business, they got the contract of 1872 from the railroads to "overcome" all their competitors, on the pretext of "increasing the trade."[229]When by this contract and those that followed it they had secured nine-tenths of the trade, they got the railroads to say "no" to the remaining one-tenth, on the pretext that they could not ship as much.[230]When the Interstate Commerce law declaredit to be a crime for railroads to forbid persons the road because they could not ship as much as others, the combination had the railroads shut out its rivals, on the pretext that they did not use tank-cars,[231]although tank-cars "are worse than powder." When regular tank-cars were offered by its competitors for shipment—as to the Pacific coast—the combination introduced an inferior tank-car, of which it claimed, without warrant, as the courts afterwards held, that it owned the patent, and so obtained the sole right of way across the continent, on the pretext that other shippers did not use this poor car.[232]
The pretext now used against the refiners of Pennsylvania was the passing phrase, "He must pay freight on barrels," in a decision of the Interstate Commerce Commission concerning Southern traffic. This decision had no relevancy to the oil business of the North. Six months went by after it was given with no intimation from any one that it related in any way to the situation in Pennsylvania, and to be so applied it had to be turned inside out and upside down. In the Rice case the Commission had decided that freight rates must be reduced on barrel shipments. This was, in the sharp language of the decision, to put an end to "the most unjust and injurious discrimination against barrel shippers in favor of tank shippers," a discrimination which the Commission has elsewhere said "inured mostly to the benefit of one powerful combination."
In ordering this reduction it said: "Even then the shipper in barrels is at some disadvantage, for he must pay freight on barrels as well as on oil."
By "must pay" the Commission meant "was paying." It was, as it afterwards protested, "rather a statement of a prevailing practice than a ruling."[233]And the remark furthermore concerned the trade in the South and Southwest alone, where special circumstances existed not found at the North.
Six months after this decision the Pennsylvania and otherNorthern roads made these words, "He must pay freight on the barrels," the occasion of an increase of rates, which stopped the refineries of the independents. They were carrying free the heavy tanks—"the most undesirable business we do," in the language of their freight agent. They had been carrying the barrels of the independents free for twenty years. Now, continuing to carry the tank-cars free, they levied a prohibitory transportation tax on the barrels. To cap it all, they declared, in announcing the new rule, that it had been forced upon them by the Interstate Commerce Commission. But the President of the Pennsylvania Railroad is found admitting that it was the oil combination that dictated the move—"the seaboard refiners insisted." "Upon your decision" (in the Rice case) "being promulgated," he wrote the Interstate Commerce Commission, "the seaboard refiners insisted that we were bound to charge for packages," barrels, not tanks, "as well as for the oil."[234]
The seaboard refiners were the members of the oil trust; the others at the seaboard had been wiped out years before by the help of the railroads. Though the Pennsylvania Railroad was not a party to the case before the Commission, though it had not been called upon to change its practice, which was what it ought to be, it did now change it from right to wrong. The Commission had ordered that discrimination between the barrel and the tank should cease. The Pennsylvania, which had not, strange to say, been practising that forbidden kind of discrimination, immediately resorted to it, and, stranger still, gave as its reason the order of the Commission against it. It must have been a keen eye that could find in a "qualified and incidental remark," as the Interstate Commerce Commission styles it, in such a decision, a command to charge for the weight of the barrels and increase freight rates; but such an eye there was—an eye that will never sleep as long as Naboth's vineyard belongs to Naboth.
All the trunk-line railroads to the East took part in the new regulation—September 3, 1888—that freight must be paid thereafter on the weight of the barrels as well as on the oil itself, and at the same rate. This increased the cost of transportation to New York to 66 cents from 52 cents, and to other points proportionately. Freight rates on the oil of "the seaboard refiners" who shipped in tanks were left untouched. In the circulars announcing the change it was said to be done "in accordance with the directions of the Interstate Commerce Commission."[235]When the refiners whom this advance threatened with ruin wrote to expostulate, they got the same reply from all the railroad officials as from President Roberts of the Pennsylvania Railroad: "The advance in rates ... has been forced upon us by the Interstate Commerce Commission."[236]
The Commission immediately called the responsible official of the Pennsylvania Railroad, which was the leader in this move, "to a personal interview," "expressed their surprise," and suggested the withdrawal of the circular and of the increased rates. This was in August.[237]No attention was paid to this by the road. The Commission waited until October 10th, and then sent a formal communication to the President of the Pennsylvania Railroad, which was followed by correspondence and personal conferences with him. The Commission pointed out that the statement of the circular was "misleading," "not true," "decidedly objectionable"; that the Commission had made no decision with reference to the rates of the Pennsylvania Railroad or the other Eastern lines; that its decision, applicable solely to the roads of the South or Southwest, had been that rates on barrels must be reduced, and that it was not right to use this as an excuse for increasing the rates on barrels. Finally, the Commission said that if it had made any ruling applicable to the Pennsylvania Railroad it would havebeen compelled to hold that its practice, of twenty years' standing, of carrying the barrels free, since it carried tanks free, was "just and proper," and that there was nothing to show that an advance in its rates was called for.[238]
The Interstate Commerce Commission was the body specially created by Congress to interpret the Interstate Commerce Law. The Pennsylvania Railroad was one of the common carriers under the orders of the Commission, and its managers were subjects of jurisdiction, not judges. But its method of running the Supreme Court of Pennsylvania, as if it were one of its limited trains, was now applied with equal confidence to the Interstate Commerce Commission. It insisted that it was itself, not the Commission, which was the judge of what the latter meant by its own decisions. The road continued the rates against which the Commission protested. The Commission demanded that the assertions that the new rule of charging for the barrels and the advance of rates was made "in accordance with the directions" of the Interstate Commerce Commission be withdrawn. The Pennsylvania road responded with another circular, in which it changed the form but repeated the substance. "The action referred to was taken for the purpose of conforming the practice of this company to the principles decided by the Interstate Commerce Commission." The Commission protested that it was not laying down any such "principles" but the corporation declared that that was what it "understood," and held to the advance made on that understanding.[239]
To the almost weeping expostulations of the Commission in interviews and letters, to show that it had said nothing which could justify the action of the roads, the officials made not the slightest concession. "I did not consider it in that way," said one of them.[240]"That was their (the Commission's) view of the case, but it was not shared by us," said thePresident of the Pennsylvania Railroad. "It was considered best to continue the practice," he said.[241]
"Why did you not rescind the order?" he was asked before the Interstate Commerce Commission.
"We understood their ruling to be a ruling for the whole country," he incorrigibly replied.
The railway president studiously withheld any assurance that he would obey if the Commission issued a direct command, which it had not done, though it had the authority.
"We would then take the subject up," he said.
Change the order to comply with the ruling of the Interstate Commerce Commission the roads would not and did not.[242]
All the roads to the seaboard and New England had made the order in concert, and together they maintained it. It was one hand, evidently, that moved them all, and though that hand moved them, for the benefit of a carrier rival of theirs—the pipe line of the trust—against their own customers, against their own employers, against the authority of the United States Government, all these railroad presidents and freight agents obeyed it with the docility of domestic animals.
These officials were the loyal subjects of a higher power than that of the United States, higher even than that of their railway corporations. They serve the greatest sovereign of the modern world—the concentrated wealth, in whose court the presidents of railways and republics, kings, parliaments, and congresses are but lords in waiting.
Thanks to the superior enterprise of their greater need, the independents of Oil City and Titusville had been able to survive the blows that had preceded, but this was too much. They had weathered the surrender in 1883 of the Tidewater Pipe Line, which had promised them freedom forever. Even the "contract" which made the allied pipe lines and the railroads in 1885 one, to tax them half as much again for transportation, had not broken them down. In spite of itthey had been able "to maintain and increase their business."[243]But now they closed their works. The new attack had been shrewdly timed to spoil for them in that year—1888—the season of greatest activity in the export to Europe and Asia. They appealed to the Interstate Commerce Commission. "The greater proportion of our refineries are idle."[244]"I have not a customer in the entire New England States. I have not had since the advance of last September."
"How was it before the advance?"
"I had a number of customers."[245]
Labor, though, as always, the most silent, suffered the most. Three hundred coopers were thrown out of work in Titusville alone within a short time, and the loss of employment to the workmen in the refineries was still more serious. This was not because trade was bad. Exports were never greater than in 1889. Government statistics reveal as in a mirror what was being done.
The exports of refined petroleum increased 21 per cent. in 1889 over 1888. But Perth Amboy, from which the independents shipped for the most part, showed a decrease of over 18½ per cent. By the stroke of a freight agent's pen the business of these men was being taken from them, to be given to others. The general tide was rising, but their feet were sinking in a quicksand.
The export business of Boston in oil was given to the "seaboard refiners" by the same stroke. Freights that had been $100 were now $174 to Boston, and $188 to New York. These rates were so high as to stop oil from going through. "The Nova Scotia trade," it was testified, "goes to New York, and from there by water, whereas they used to buy in Boston. Boston brokers will ship oil from New York and get it to Nova Scotia cheaper than if it went from Boston, whereas when we had the export rate we could compete in that market."[246]Two months later most of what remained ofthe business of the independents in New England was added to the gift of their foreign trade, which had already been made to the "seaboard refiners." By an order of October 25, 1888, the railroads made it known to these "pestilences," as the lawyers of the railroads called the independent refiners in court,[247]that they would not be allowed to send any more through shipments into New England. This was done, as in Ohio in 1879,[248]without the notice required by law, though in the meantime a Federal law had been passed requiring notice.[249]
This order was the finishing touch in the task of using the freight tariff to prevent freight shipment. It shut the independents—the hunted shippers—out of over 150 towns in New Hampshire, Vermont, Maine, Massachusetts, including Manchester, Burlington, Portland, Salem, in which they had built up a good business, and it made it impossible to reach these places except by paying high local rates—from station to station—which were not required of their competitor, who shipped on through rates. The railroads would take the oil of the independents for shipment, but would not tell them what the rates would be. In this, as in all the moves of this game, we see the railroad managers of a score of different roads, at points thousands of miles apart, taking the same step at the same time, like a hundred electric clocks ticking all over a great city to the tune of the clock at headquarters that makes and breaks their circuit.
The independents were saved by a Canadian railroad from the destruction which American railroads had planned for them. The Grand Trunk gave them a rate by which they could still do some business in the upper part of New England, though to do this they had to ship the oil into Canada and back into the United States. The effect of this abolition of through rates in "cheapening" oil was that the people of Vermont, for instance, had to pay 2 cents a gallon more than any other place in New England.[250]
While all access for others to New England was cut off, the "seaboard refiners," sending the oil in free tanks to the seaboard, transshipping it there into vessels by the facilities of "which they have a monopoly,"[251]easily made their own the business of their rivals in the 150 towns from which the latter were thus cut off. No one has been able to move all the railroads in this way, as one interlocking switch, to obey a law or accommodate the public. But it was done easily enough for this kind of work. Possession was got of the railway managers at the initial points, as was done so successfully in another case,[252]and all the other railway managers, as far as Boston, followed in their trail. Reproducing the tactics in Ohio in 1879, it was only against oil that this attack of the tariff was made. Other freight for export, of which there was a vast variety, continued to be carried to Boston at the same rate as before.[253]
All the freight agent of the initial road had to do with the oil on its way to Europe was to pass it along to the next line. Whether, after leaving his road, it went by the way of Boston or that of New York made no difference to his road, and was in no way his affair. But it made a great deal of difference to those who wanted all the business of Europe and America for themselves, and we consequently find him serving them, and dis-serving his employer (the railroad), by charging 21 cents a barrel if the oil was going to Boston after leaving his line, but only 15-56/100 cents if it was going to New York. When asked if he thought he was justified as a railroad man under the law in making the charges for what he did vary according to what was done by the business after it left his hands, he refused to answer.
"You will not answer?"
"Not at present."[254]
All the connecting and following roads are on record as having protested against the measures in which they followedthe lead of the initial lines.[255]The freight agent of the West Shore Railroad declared that the prohibition of through shipments to the towns of Massachusetts, Vermont, New Hampshire, and Maine "occurred simply through mistake;" but the mistake, he acknowledged, had never been corrected.[256]This "mistake" and that of September, which preceded it, put an end to a large business, amounting in 1888 to 900,000 barrels. The men, whom the railroads began to massacre after having pledged them full protection, saved a fraction of their trade in New England, as we have seen, only by taking refuge with a foreign railroad. The railroads against their will, as they swore, lost business as well as honor, but the mistake was not corrected.
It would tax the imagination of a Cervantes to dream out a more fantastic tangle of sense and nonsense in quixotic combat than that which these highwaymen spun out of the principles of "scientific railroading." All that highway control could do to destroy the barrel shippers for the benefit of the tank shippers was done; and yet the barrel method is the safer and more profitable for the railroads.[257]The cars that carry oil in barrels can return loaded; the railroads have to haul the tank-cars back empty and pay mileage on them.[258]For a series of years on the Pennsylvania Railroad the damage from carrying oil in barrels was less than half the damage from the carrying of oil in tanks.[259]The general freight agent of the Pennsylvania Railroad Company tells the Interstate Commerce Commission that the carriage of oil in tank-cars "is the most undesirable business we do." He described a smash-up at New Brunswick where there was a collision with a line of tank-cars. The oil got on fire; it ran two squares, got into a sewer, overflowed the canal, which was then frozen over, and followed the ice a square or two beyond. Besides having topay nearly five hundred thousand dollars damages for the destruction done, the railroad lost its bridge, which cost two or three hundred thousand dollars. It lost more money than it could make carrying oil for ten years. "I regard it," he said, "as worse than powder to carry; I would rather carry anything else than oil in tanks."[260]Barrel shipments being the best for the railroads, these princes of topsy-turvydom move heaven and earth to destroy them.[261]
There was no end to the "mistakes" made by the railroads for the "self-renunciation" of their business, though this was in favor of those whose pipe line made them rivals. They charged more for kerosene in barrels than for other articles of more value, contradicting their own rule of charging what the traffic will bear. They let the combination carry sixty-two gallons in every tank free on the theory of leakage in transportation. "The practice," said the Commission, "is so obvious and palpable a discrimination that no discussion of it is necessary;" and they ordered it discontinued.[262]
Though the railroads brought back the tanks free, for the return of the empty barrels they never forgot to charge. This charge was made so high that at one time it prohibited the return from all points.[263]"The monopoly uses a large number of barrels in New York City," the independents said to the Commission; "it is to its interest that empty second-hand barrels should not be returned to the inland refiner." When this was brought out the Pennsylvania and other railroads promised to make reparation, but had not done so years later when the case was still "hung up" in the Interstate Commerce Commission.
It was not lack of capital or of diligence that made the independents use barrels instead of tanks; tanks were useless to them. All the oil terminal facilities of the railroads at the seaboard had been surrendered to the combination for its exclusive use.[264]These were the only places where tank-cars could be unloaded into steamers. "There are no facilities to which we, as outside refiners, have access to load bulk oil into vessels," and none where these refiners could send oil in tank-cars to be barrelled for shipment abroad.[265]No matter how many tank-cars and tank-vessels the independents might have provided, they could not have got them together. Between the two were the docks in the unrelenting grip which held solely for its private use the shipping facilities of these public carriers. Not even oil in barrels could the independents get through these oil docks.
The Weehawken oil docks of the Erie road on New York harbor are the best in the world. The Erie Railroad has $920,760 invested in them, but only one shipper can use them either for tanks or barrels.
The Western traffic manager of the Erie was asked:
"Would you take a shipment there over the Erie road of independent oil consigned to the New York docks?"
"No, sir."[266]
The Pennsylvania Railroad refuses to haul tank-cars for the independents to any other point at New York than the terminals so controlled by the combination. It will not haul them to other docks of its own. It will not let oil be shipped over its line to the points at which it connects with other roads for other harbors, though it will take shipments of anything else than oil.[267]This amounts to a refusal to allow the independents to use tank-cars or tank-steamers. Practically the same policy is pursued by all the main trunk-lines. These independents could get rid of their export oil only by selling to the combination. Through its other self—the company which controls the terminals—it has kept an agentin the oil regions for years to buy for export this refined oil which its owners and makers could not export themselves. This is the "immediate shipment" of 1878 in another phase.[268]
"You have to sell to the Standard Oil Company in order to get your oil shipped in bulk from Communipaw?"
"Yes, sir."
"The independent cannot get his oil into a bulk vessel at Communipaw?"
"No, sir."[269]
To meet these disclosures the Pennsylvania presented two affidavits. One was from its general freight agent that its tank-cars were offered freely to all; but it did not deny, for it could not deny, any of these facts about terminals, which explained why the flies did not walk into its parlor. The other affidavit was from the secretary of the corporation controlling the terminals for the oil combination, and it similarly declared that its accommodations were furnished "upon exactly the same terms to all." How long it had been doing so, or how long it would continue to do so, it did not state, as the independents pointed out to the Commission. If this were the truth instead of being, as the independents hinted, "evidently a situation that has been recently arranged for the purposes of this application"—to the Interstate Commerce Commission for further delay—why had none of the independents, dying for want of export facilities, resorted to it? This was not explained, for it could not be. The independents explained the situation to the Interstate Commerce Commission: "The inland refiner who intrusts his oil to a storage company at the seaboard with a view to exporting, puts himself completely into the power of such concern. The exactions that may be unfairly imposed in individual cases for 'loss by leakage,' 'dumping and mixing for off-color or off-test,' 'cost of water white oil for mixing,' 'tares,' 'tares guarantee,' 'commissions on sales,' 'interest ongoods until loaded and paid for,' 'incidental expenses,' and many other known matters of charge, may amount to a partial confiscation of the cargo."
The corporation which manages this monopoly of the terminals at Communipaw is a mysterious concern. Who own its stock, and what its relations with the railroad are, the Interstate Commerce Commission could not find out. Its president and treasurer were summoned to testify, but refused to attend. The manager of the oil combination's pipe lines stated that he knew of stock in the company that was owned by a member of the trust, though he afterwards qualified that he did not know it "positively."[270]The charge that this company was controlled by the monopoly was specifically made before the Interstate Commerce Commission and was not denied, and the Commission found that the oil combination "have a monopoly of those facilities to the exclusion of complainants."[271]It thus reported the same state of facts in 1892 as the New York Legislature in 1879.
The barrel was therefore the fountain of life for the independent. Without barrels he could not get his oil on board ship for export, and without exporting he could not live and refine for the home market. The oil combination ships in barrels also. According to the figures given in this case by one of its "assistant managers" its shipments by barrel are very large. This testimony was introduced to make it appear cruel to insinuate that the difference between barrels and tanks was made by the railroads to favor it, since it as well as the independents used barrels. The Commission openly expressed its dissatisfaction with this evidence, and dismissed the subject by the conclusive observation that the combination gains more by the low tank-car rates than it loses by the high barrel rates.[272]For the independent, however, the difference in rates was almost all loss, for he at that time shipped mostly in barrels. The high prices it made for oil and for freights at Titusville and Oil City did not hurt the combination. It had only to close its refineries there and transfer their business for the time to its establishments elsewhere. This it did, keeping some of them idle for years.[273]
Such was the story told to the Interstate Commerce Commission, in many hundred pages of testimony, by the refiners of Oil City and Titusville, who appealed to it for the justice "without expense, without delay, and without litigation" promised the people when the Interstate Commerce Commission was created.[274]The game, of which you have perhaps been able to get a dim idea from the printed page, the Commissioners saw played before them like chess with living figures. For years the principal subject of their official investigations had been the manœuvres of the oil ring. They had been compelled by the law and the facts to condemn its relation with the railroads in language of stinging severity, as every court has done before which it has been brought. Better than any other men in the country, except the men in the ring, the Commissioners knew what was being done. They comprehended perfectly who the "seaboard refiners" were whose demand that their competitors should be shut out of Europe and New England was better law with the Pennsylvania Railroad than the decisions of the Commission. They needed no enlightenment as to the purpose of the secret contract between the members of the oil trust and the Pennsylvania, nor any instruction that the "pool" between the pipe line and the railroad was as hostile to the public interest as any pool between common carriers.
The chairman of the Commission had openly hinted that the relations of the oil trust and the railroads were collusive, and that the spring from which they flowed was a secret contract.[275]It was shown to the Commission that at the same time the railroads advanced their rates the oil combination bid up the price of the raw material of the Titusville and OilCity refineries. This is called "advancing the premium."[276]The raise of the freight rate added 14 cents a barrel to the cost of production, and the increased price of oil put on 12 cents more, either item large enough to embarrass competition. The Interstate Commerce Commission in its decision recognized the practical simultaneity of the three movements to the disadvantage of the independent refiners: (1) the bidding up of the price of crude oil against them; (2) the new rule of charging for the weight of the barrel; and (3) the abrogation of the through rates to New England. These three things occurred in a period of about two months. This, the Commission says, lends color to the charge that there was concert of action between the combination and the railroad.
The Commissioners in their sittings had seen that the counsel for the railroads did not pretend to bring forward any evidence to prove that their attack on the barrel shippers was just or proper. Although "the seaboard refiners," for whose pecuniary profit these things had been done, were not on trial, their witnesses, agents, and attorneys were in constant attendance, and kept close watch of the testimony and arguments. The Commission had its attention called specifically to the fact that the defence of the railroads on trial was being directed by the same "seaboard refiners" who had "insisted" that the railroads should violate the law. The counsel for the Erie road was frank enough to admit that it was they who had prompted that carrier in its litigation before the Commission. When the Erie appeared before the Commission to give "further testimony," its representative could not tell at whose request its application therefor had been made, and said he had known nothing about the matter until the day before. Three of the six witnesses then examined were from the offices of the oil trust, whose members had refused to come when summoned. The only subpœnas they obey are those issued from their own headquarters.
The president of the oil combination's pipe lines—who isalso the president of the steamship line in which its members are interested—and the vice-president of the pipe lines, and the president and the treasurer of the company which holds for the trust the monopoly of the terminal facilities, and the President of the New York, Lake Erie, and Western Railroad, and its vice-president, were all served with official notice to come and testify. But these gentlemen refused to appear. "It is for your honors," said the counsel for the refiners, suggestively, "to determine what obedience shall be paid to your subpœnas."[277]But the Commission did nothing.
The defendant corporations, and their lawyers, officers, and witnesses, made no pretence of treating the Interstate Commerce Commission with anything more than a physical respect. The representatives of the railroad companies practically told the Commission that its decisions were subordinate to theirs, and that they knew better than it what its rulings meant. Witnesses refused to answer questions they found awkward, and the lawyers gave the court to understand that if it did what they did not like they would snuff it out. The Commission heard one of the refiners who was a petitioner before it assailed with coarse vituperation, described in open court as a "pestilence,"[278]because he had dared to write more than once to the railroads for the reduction of rates which would save him from destruction, and which the Commission had, not once, but half a dozen times, said the railroads ought to give to all.
The Commission had itself, outrunning the complainants, been the first to "pointedly disapprove" the attempt to destroy the barrel shippers, and to call upon the railroads to rescind their action. This protest it had made repeatedly—first with the subalterns, then with the chief of the Pennsylvania Railroad, in personal interviews, letters, and finally in an official pamphlet, which was an appeal to the public to judge between it and the corporation. It had reiterated its protest in a formal decision rendered September 5, 1890, after deliberating seven months on the evidence and arguments. In this "they recalled the fact, now almost ancient history, that" the change was "pointedly disapproved by the Commission" when first made, and with lamentations noted that, though almost two years had passed, "the carriers have failed to comply with the suggestions there made. In charging for the weight of the barrels as well as the oil, the carriers that make use of both modes of transportation have disregarded the principles plainly and emphatically laid down by the Commission in the cases cited, and have paid no attention to the subsequent official memorandum explanatory of the decisions in those cases, but have persisted in maintaining a discrimination against barrel shippers. An order requiring the discontinuance of the discrimination has therefore become necessary."[279]
An order has therefore become necessary. The Commission then ordered one road concerned in this separate case to "cease and desist" within thirty days. Although several cases affecting a number of refiners and a number of roads had been heard and submitted together, as practically one in traffic, territory, circumstances, and the main question, it confined its decision to the case which involved only one road, and that a subordinate. There the Commission stopped; and there it stuck for more than two years, from September 5, 1890, to November 14, 1892, refraining from a decision in the case of the principal offender, the Pennsylvania Railroad.
The Pennsylvania Railroad is the representative carrier in the oil traffic. It controls all the oil business that passes over its lines, no matter how far away it originates. The initial road which led the attack on the barrel shippers is subsidiary to the Pennsylvania in the oil business, and the Pennsylvania controls its rates and regulations.[280]The Pennsylvania has been the head and front of the railroad attack on these men, and has been the open nullifier of the law and the Commission in this matter. It was the principal defendant on trial, and its casewas identical with that of the others, except that it was the most flagrant; but no order would the Commission issue against it for two years. Wendell Phillips says: "There is no power in one State to resist such a giant as the Pennsylvania road. We have thirty-eight one-horse legislatures in this country; and we have a man like Tom Scott with three hundred and fifty millions in his hands, and if he walks through the States they have no power. Why, he need not move at all; if he smokes, as Grant does, a puff of the waste smoke out of his mouth upsets the legislatures." When the Commission had ordered a change of rates on barrels in the South, the Pennsylvania did the Commission the double disrespect of declaring that that order was binding upon itself against the protest of the Commission, and of using an order to reduce rates as an excuse for raising them. But now when the Commission, September 5, 1890, made a decision on the same point in a case arising in the territory and traffic in which the Pennsylvania was the chief carrier—a case, too, of a bunch of cases in which the Pennsylvania was a defendant—that road ignored it. The Commission, in the Rice, Robinson and Witherop case, in 1890, promulgated the very rule which the Pennsylvania Railroad established, which it had been following for twenty years, and which its officers before the Commission swore was the correct one, but the Pennsylvania refused now to accept and follow it. The road which was now ordered to go back to the correct practice, and which had perforce done so, was the initial road. The Pennsylvania had followed its initiative in adopting a "false" and "misleading" and "unwarranted" practice, but would not follow it in changing to the good.
The attitude in which the Pennsylvania road and the Commission were thus placed towards each other was this: Shall the Pennsylvania Railroad be allowed to make a charge which the Commission volunteered to rebuke it for making, and which it had decided, in the parallel case of another road in the same situation, was altogether unwarranted and must cease? They stood thus facing each other more than two years. There was apparently no excuse for delay theCommission would not accept. At one time it granted postponement on the plea of a lawyer that his father was sick. More than the lawyer's father were sick; a whole community of business men were sick; the entire country was sick, its industry, law, politics, morals—all. The administration of justice was sick. If the facts had been uncertain, or the law undetermined, the course of justice would still have seemed cruelly sluggish; but here was a matter in which the facts and the law in question had been settled, and by the Commission itself, over and over again. The only thing remaining was that the Pennsylvania Railroad, as well as the road which was its next neighbor, must obey the law. The railroad against which the Interstate Commerce Commission decided in 1890 on this point joined the Pennsylvania at Irvineton and Corry. The Commission put the law into force on one side of those points, but for two years gave the Pennsylvania Railroad and others "rehearings" and other means of delay, and did not open its lips to say that the same law must reign on the other. The conduct of this corporation meant that it intended to respect neither the Interstate Commerce Commission nor the Interstate Commerce law; that it recognized the will of cliqued wealth as the supreme law; that the protestations of loyalty to the law and the Commission with which it accompanied its defiance of both were not offered as a disguise of respect, but were chosen as a method which would most embarrass the people's tribunal in upholding itself and the rights of the citizens. All that was needed by those who had contrived and were continuing the wrong was time—they had everything else. Time they got, and plenty of it.
July 15, 1891, the refiners said to the Commission: "Two and one-half years have elapsed since these complaints were filed, and the end is not yet. We earnestly hoped that we had succeeded in convincing this Commission that this respondent was inflicting on complainants a great and unnecessary wrong, which merited the most speedy remedy and redress possible. If we have failed in this we are unable to ascribe the failure to a lack of evidence or promptness in presenting it. It was not thought possible that all this great length of time would be required to reach a conclusion in these matters, under all these circumstances, especially after the decision in the Rice, Robinson, and Witherop case (September 5, 1890). The enemies of the complainants could scarcely have found or wished for any more effectual way of injuring complainants than by a long delay of their cause. Further delay simply means further injury to complainants." The two years and a half have gone on to more than five years. A decision has been made, but the end is not yet. The delay prevented the injured men from going to any other tribunal with their complaint. They have succeeded in keeping alive, though barely alive, because the price of their raw material has declined a little, and given them a margin to cling to. This delay has denied them justice in the special tribunal they were invited to attend, and has also denied them the relief they could have got from other courts.
The Commission heard all this urged by eloquent counsel. It heard the men who were being crushed tell how their refineries were being closed, their customers lost, their business wrecked, their labor idle, while the trade itself was growing larger than ever. It saw the statistics which proved it. But no practical relief have the independents of Oil City and Titusville been able to get from it. They have lost the business, lost the hopes of five years, lost the growth they would have made, lost five years of life.
This delay of justice is awful, but it is not the end, for the decision, though it came at last in November, 1892, has brought no help. It required the roads to either carry the barrels free or furnish tank-cars to all shippers, and for the past ordered a refund of the freight charged on barrels to shippers who had been denied the use of tank-cars. More than five months after it was rendered the independents, in an appeal (April 20, 1893) to the Interstate Commerce Commission, called its attention to the fact that "none of the railroads in any one of the cases has as yet seen fit to obey any of its orders save such and to such extent as they found them advantageous to themselves, although the time for doing so has expired." More appalling still, it appeared, in an application made in March, 1893, by the Pennsylvania Railroad for a reopening of the case, that these years of litigation were but preliminary to further litigation. The counsel of the railroad, in the spirit in which it had previously warned the Commission that its powers "may be tested," now informed it that the road, if the application for further delay were not granted, would "await proceedings in the Circuit Court for enforcement of what it believed to be an erroneous order." And in another passage it referred to the proceedings before the Commission as being simply proceedings "in advance of any final determination of the case on its merits." Four years and a half had been consumed when, as the independents pleaded to the Commission, "it might reasonably have been expected that as many months would have sufficed," and yet these are only preliminary to "the final determination of the case on its merits."
"The delay suffered has been despairing—killing," was the agonized cry of the independents in their plea to the Interstate Commerce Commission not to grant this new delay. "We pray that no more be permitted." But in November, 1893, more delay was permitted by granting another application of the Pennsylvania Railroad for "rehearing." This was limited to thirty days, but these have run into months, and "the end is not yet." Five years have now passed in this will-o'-the-wisp pursuit of justice "without delay."
And another "outsider," who has been a suppliant since March, 1889,[281]before the Interstate Commerce Commission for the same relief—the free carriage of barrels where tanks are carried free—is still a suppliant in vain. The Commission consumed three years in hearings and rehearings, only to report itself unable to decide this and other important points raised by him. It was "a most perplexing inquiry," "we are not prepared to hold," "we desire to be made acquainted with the present situation," and "the results exhibited by recent experience." "No such intimation is intended," said the Commission, as that it is right for the roads to charge for barrels when they carried tanks free—not at all. "We simply refrain" from stopping the wrong, and "reserve further opinion for fuller information and more satisfactory inquiry." Perhaps, however, by "voluntary action"[282]the railroads which had contrived this wrong would be good enough to stop it, though the Commission was not good enough to order them to do so! The Commission held that the rates were "unlawful; but, for want of sufficient data, we do not undertake to point out the particular modifications and reductions which would satisfy the demands of justice."[283]"We are not now prepared to determine," "we feel unable to prescribe," "is not now decided," "reopened for further evidence and argument," are the phrases with which the Commission glided away from the settlement of other vital points as to which its intervention had been invoked for more than three years. Even when it directed the railroads to reduce their charge it added "to what extent the Commission does not now determine, and the cases will be held open for such further," etc. And there his case hangs even unto this day, for since this "not-now-decided" decision the "outsider" has never renewed his appeals to the Interstate Commerce Commission concerning these cases or others,[284]but, hopeless of redress, has let them go by default.
The secret contract stands, but the barrel men survive, barely, despite monopoly, by changing to tank-cars, and getting a pipe-line and some terminals. They create seaboard facilities and persuade the Jersey Central to haul their tanks. To meet this road they lay the pipe now to be described, and, to escape railroads altogether, will build to New York, if not ruined meanwhile.
CHAPTER XII
UNFINISHED MARCH TO THE SEA
BetweenMay and December, Sherman made his march from Lookout Mountain to the sea, cutting the Confederacy in two. For thirty years the people of Pennsylvania have been trying to break a free way to the ocean through the Alleghanies and the oil combination, and in vain. For ten years the hope of independent outlet to the sea from the oil-fields of Pennsylvania lay prostrate under the blow of the surrender of the Tidewater. Twice the people have tried again, only each time to be headed off. The first of these two rallies collapsed in the shut-down of 1887; the second was stopped at the cannon's mouth by an armed force at Hancock, New York, in the year of peace, 1892.
By 1887 the people of the oil regions had recovered from the shock of losing the independent Tidewater Pipe Line,[285]and began to make new plans for getting to the sea. By some means the committee to whom they had intrusted the management of the new enterprise was persuaded to go to New York to confer with the officers of the oil combination, who had measures of conciliation to propose that would make it unnecessary to build the new pipe lines. This committee, and finally the constituency it represented, were made to believe that the cause of the woes of the oil country was simply and only that there was too much oil—not that there were too many empty or half-filled lamps. They agreed to cut down their business one-half, and were lured away from the project of getting full prices on a full product. The outcome wasthe "shut-down" of 1887. The producers were persuaded it would bring back oil to a dollar a barrel—to stay there; but after a brief and unremunerative spurt in values, a reaction, lasting to the present, carried prices to a lower level than ever, and the producers found that the last state of those who let such spirits enter them is always worse than the first.
Several times before this the oil producers had tried to imitate the policy of scarcity, which the most brilliant business successes are teaching to be the royal road to wealth. It is stated by the report of the General Council of the Petroleum Producers' Union[286]that the producers had twice entered into arrangements with the oil combination to lessen the product and regulate the price of crude petroleum, and that in each case the arrangement had been violated by the latter when it seemed about to become profitable to the producer. Hence, when invited to confer for a third venture of this sort, the Council declined to do so. But in 1887 the invitation, extended for the fourth time, was a third time accepted. The producers succeeded in the restriction, but they did not better their condition. These men gave the world the spectacle of the producers flirting with the solitary and supreme buyer of their product, in the belief that he would help them to raise their price against himself.
The agreement which was made with the producers was shown before Congress.[287]The producers were bound for a year from November 1, 1887, "to produce at least 17,500 barrels of crude petroleum less per day," and to make it, if possible, "30,000 barrels less per day." In return for this the oil combination agreed to give the speculative profits on 6,000,000 barrels of oil—the profits on 5,000,000 for them, and on 1,000,000 for their laborers. This move of those who want petroleum cheap to make it dear is one of the equivocations of policy in which princes have always distinguished themselves. The need of the hour was to stop the building of the competing pipe line. That was accomplished by thescheme of the shut-down, which amused the producers, and, as subsequent prices proved, did not hurt the buyer of their oil; quite the contrary.
Drills and pumps at once ceased their operations throughout the oil regions. Working-men were thrown out of employment, stores were closed, hundreds of families had to subsist on charity. One of the Broadway producers who made this bargain for the shut-down admitted to the committee of the New York Legislature that "the oil-producing interest was abnormally depressed," and "that there was great distress."[288]The agreement itself recites that the price of petroleum had been during the preceding year "largely below the cost at which it was produced." The people of the oil country went to work with desperation to enforce the policy of oil famine. Committees were formed among the well-drillers in each district, "whose duty," the formal papers of organization stated, "shall be to keep a lookout for and endeavor to prevent the drilling of wells." "We have no way of stopping those who want to drill wells," one of the officers of the organization said, "only by good, reasonable talk." The Well-drillers' Union appointed and paid one of their members to reason with people who insisted upon digging wells. It is not necessary to question the good faith of the assurance their officials gave Congress that his duties did not require the use of nitro-glycerine. But, "unofficially," nitro-glycerine was freely used to enforce the shut-down. Men who failed to feel the influence of the "good talk," and went on putting up machinery, and drilling wells, would find their derricks blown into kindling-wood. Referring to one of these occurrences, a member of the Well-drillers' Union told Congress it was a case where no permission had been granted by the union to drill.
"Was the rig destroyed?" he was asked.
"The derrick was blowed up by some kind of compound."
The quantity of the "compound" was enough to shake windows six miles distant. The derrick and the machinery were "cheapened" into junk.
"Did you ever know of a case of any man's derrick and apparatus being blown up in the oil region before the formation of this association?" one of the shut-downers was asked.
"I could not say that I do."[289]
The owner of the apparatus destroyed, it was stated by the press, had been repeatedly requested to join the shut-down, but had refused. There were several such occurrences, recalling the affairs at the Buffalo refinery in 1885.[290]When the people in Pennsylvania saw apostles of the gospel of making oil cheap enter into a bargain with them to make it scarce, it is not surprising that they should have become bewildered to the point of thinking that the noise of nitro-glycerine was "good talk," and should have sunk into the depression, monetary and moral, that alone could make such haggard faces rise among an honest laborious people.
We have seen how the refiners who pass under the control of the trust are compelled to make monthly reports. The same perfectness of discipline appears at once among the producers in this shut-down. Every one of them had to make monthly reports of how much oil he had taken out of the earth. If the mobilization of industry goes on at the rate of recent years, it will not be long—not later, perhaps, than the end of the nineteenth century—before all producers, and all makers, will be sending monthly reports to New York of grain, cattle, iron, wool, lumber, leather, and the manufactures of them to trustees, whose "pleasure it is to try to make them"—the men as well as the commodities—"cheap." The supervision by means of these monthly reports was so close that over-production, however minute, was immediately known. If the owner of a well over-produced only the one-hundredth of a barrel, he got a notice to go slower.[291]
To the producers engaged in it the result of the shut-down was that when their representatives at the end of it called on the oil combination in New York for the profits on the 5,000,000 barrels of oil set apart for them, as agreed, theywere given a check for a sum between $200,000 and $250,000.[292]This was divided among those who had co-operated—nearly one thousand—in proportion to their share in the good work of making the supply of the light of the people so much "less per day." The drama of industry has not many scenes more striking than this of these men—the principal producers of the oil country, which had yielded in the thirty years up to this time more than 300,000,000 barrels of oil—going to the great syndicate in New York to buy the privilege of restricting the production of their own wells, thankfully accepting the scanty profits on a speculative deal in the oil exchange of 5,000,000 barrels, receiving with emotions of enthusiasm a check for a couple of hundred thousand dollars for a year's "co-operation" from the men who had made out of their product hundreds of millions.
The shut-down was a great disappointment in prices. The average price of petroleum at the wells for October, the month before the shut-down, was 70-7/8 cents a barrel. The highest monthly price reached during the restriction was 93-5/8, in March, 1888. The average for October, 1888, the last month of the year originally agreed upon, was 90-5/8. By a subsequent understanding the restriction was continued until July, 1889. The price then was 95-1/8. At no time during the shut-down was the coveted dollar mark maintained, and it was barely touched in March, 1888, after which there was a sharp decline to 71-3/8 in June, with savage losses to "the lambs." High prices did not come until the accumulation of 6,000,000 barrels set aside "for the use" of the producers had been sold out. After that there were in the winter following—1889-90—a few months in which the price rose, as to $1.12½ in November, 1889, but it sank the year following to 60¾ in December, 1890, and it continued to go down until crude oil reached 50 cents in October, 1892, the lowest point known since there was an oil market.[293]
The men with whom the producers made their bargain, shrewder than they, and versed in the dynamics of the markets, knew that the effect of setting apart 6,000,000 barrels of oil would be ultimately depressive to prices, not stimulating. Not knowing when or at what price this vast amount would be unloaded, buyers, both for use and for speculation, would be made timid, and prices would be held in check. The shut-down produced a great gambling mania. Untold millions were lost by men in the oil country, who gambled on the exchanges to make the profits of the expected advance. Local panics, bank failures, ruin in all its shapes, were the escort of shame and loss which marched with the shut-down. Curiously enough, it was those who speculated for the rise who were the losers. There was against them an element which knew better than they what prices were going to be, for it made them. It is this ability of insiders to bet on a certainty which has been the destruction of the oil exchanges. From Pittsburg to New York they are now practically all dead.
The amount of the reduction effected by the shut-down, independent of a natural decline which had set in some months before, has been estimated at 11,000,000 to 15,000,000 barrels. The production ran down from 25,798,000 barrels in 1886 to 21,478,883 in 1887, and 16,488,688 in 1888. In 1889 it was up to 21,487,435 again, and in 1890, 29,130,910.
The price of light advanced. When the negotiations were in progress the producers were told that if the flow of oil glutting the market could be stopped the price of refined could be advanced, and that for every eighth of a cent a gallon advance in it the producers could expect an advance of 4 cents a barrel on their crude oil. Refined advanced during the shut-down to a price to correspond to which the crude should have risen to 96 cents a barrel. Instead, its price fell to 78 cents. The committee went to New York "to protest." Their New York ally said there was no change in the markets of the world. That they could get the price for the refined, but they did not propose to hold up the price of the crude. "If we could not do that, they could not help it."
"He had refined to sell, and crude to buy?"
"Yes, sir."[294]
This shut-down, the New YorkTribunesaid, was "one of the most interesting economical experiments made in recent years." It was, as the New YorkWorldsaid, "one of the largest restrictive movements ever attempted in commerce." The president of the trust, when examined on February 27, 1888, by the New York Legislature, as to the agreement for the shut-down, declared positively that nothing of the kind had been done.
"There has been no such agreement?" he was asked.
"Oh no, sir!... Oil has run freely all the time."
"And no attempt to do that?"
"No, sir."[295]
He afterwards recalled these denials, and excused himself on the ground that as he had been in Europe when the arrangement was made he had known of it only "incidentally."[296]A "shut-down" on facts is as necessary to the success of the schemes for scarcity as a shut-down in oil. There are too many facts, as well as too much oil.
"By advancing the price of the crude material you necessarily advance the price of the refined?" another of the combination was asked.
"Yes, sir."[297]
The average price of refined at New York for export was 6.75 cents a gallon in 1887. This rose to 7.50 in 1888, the highest average price for any year between 1885 and 1893.[298]The effect of the restriction—"one of the most extensive ever attempted in commerce"—was thus to make oil and light and all its other products scarcer and dearer. The producers really got no good. After the shut-down had been in progress five months, their committee issued an address congratulating them on the "glorious results" achieved in thefidelity with which the pledge of restriction had been kept, but continued, "But prices are not yet remunerative."[299]
"We do not seem to have gotten it," one of the producers said to Congress, referring to the assistance they expected in an advance of the price to profitable figures.[300]No lasting gain came to any one unless to the monopoly, and it is possibly too soon to tell whether its gain will be "lasting."
Part of the speculation was that the profits of 2,000,000 barrels, contributed equally by the combination and the producers, were to be distributed among the working-men affected by the loss of employment. Men who had been earning $12 a day received a dollar a day from this fund, and lay idle.[301]A blistering picture of the condition of the region is to be seen in the testimony of one of the producers.
"The payments that you have made, or that your assembly has made, have been to individuals?"
"Yes, sir."
"State what the character of the occupation of the individuals thus relieved was in relation to the shut-in."