This conflict between Capitol Hill and Standard Oil trust escalated into a public spectacle that was equal parts Watergate and The Magnificent Seven, and the public lined up for ringside seats. “[It] became a kind of morality play for any individual who felt threatened by the new industrial order; a kind of commercial equivalent to the Western, as the last glimpse of a heroic age,” wrote historian Anthony Sampson. “The trust-busters saw themselves as defending the very core of democracy.”
Rockefeller was characteristically unfazed by the investigation, and cast the charges against his company as a challenge to the nation’s economic structure as a whole: “It must in good time be perceived by all that the centralized corporation is a necessity of progress. There has been substantial basis for popular suspicion…but it is poor logic to find against the whole idea of corporations because of these few failures.”
The Justice Department sued Standard Oil for antitrust violations in 1909 and, after 444 witnesses gave testimony, the company was found guilty; Rockefeller and his executives were slapped with the maximum penalty. The gray eminence himself was playing golf when news of the decision reached him. He read the messengered letter, slid it into his pocket, and said stonily, “Well, gentlemen, shall we proceed?” When his colleagues pressed him, he disclosed the damage: a $29 million fine ($638 million in today’s dollars). Standard appealed the decision, and the case went to the Supreme Court. On a sunny day in May 1911, the Supreme Court upheld the earlier verdict and ordered the monopoly to splinter into more than a dozen independent companies.
“This was an extraordinary task,” Yergin explained to me. “Here you had a company that spanned every state in the Union, operated in multiple countries, refined more than three-quarters of America’s oil, exported four-fifths of its kerosene, sold the railroads nearly all of their lubricating oil, and had a massive transportation business. How are you going to divide that up?” Standard’s executives decided to split up regionally. The largest of its subsidiaries was Standard Oil of New Jersey, which acquired Spindletop-born Humble Oil and later became Exxon. Standard Oil of California later became Chevron, subsequently merging with Buckskin Joe’s Texaco. Standard Oil of New York later became Mobil. Standard Oil of Ohio later became part of BP. Standard Oil of Indiana became Amoco. These subsidiaries eventually comprised six of the legendary “Seven Sisters” that dominated global oil production throughout the twentieth century.
As these spin-off companies competed to produce oil products better, faster, more cheaply, and more efficiently, they pushed each other to innovate. Mobil, for instance, developed a breakthrough method for refining oil into gasoline, which increased by 45 percent the amount of product it could get for every barrel of crude. By 1917, the profits of the spin-off companies had collectively shot up to double, then triple the profits of Standard Oil before the dissolution. Rockefeller, in turn, had nearly quadrupled his wealth and become the richest man in the world.
FATEFUL PLUNGE
An even more transformative event was looming on the near horizon. World War I would have a profound effect on the growth and influence of the young oil industry. The war presented America’s oil executives with an opportunity to gain protection, stability, and security by expanding their influence into politics.
This was the first major war of the Industrial Age—a “war that was fought between men and machines,” as Yergin put it. Close to 13 million people lost their lives. Never before had petroleum-powered battleships and tanks been on the front lines of battlefields. They replaced the horses, trains, and slower ships that had moved troops in wars past. The defining decision for this mechanized war—a decision often credited with the Allies’ victory—was in fact made in 1911, the same year as the trust bust, before the war began. Winston Churchill, serving in the admiralty, made the difficult choice to transform his entire naval fleet from coal-powered engines to oil, a new and riskier fuel but one that promised the great strategic benefits of faster ships and more efficient use of manpower. This momentous decision—he termed it the “fateful plunge”—ultimately helped clinch the Allies’ victory, as their ships outmaneuvered the coal-fired fleet of the German Reich.
Oil also won big victories on land. Yergin told me the story of the “Paris taxi armada”: Germans were amassing troops in the hills to the north of Paris in 1914, far outnumbering the Allied soldiers who were dispersed to the south. There was no train system to transport the Allies northward, and traveling on foot would never get them to the front in time to repel the assault on Paris. French general Joseph Gallieni had an idea: in a matter of hours he rounded up six hundred Parisian taxicabs and commissioned them to shuttle six thousand French reserve infantry troops to the battlefield—paying each driver his standard meter fare after a swift victory.
Military successes such as these amounted to dollar signs in the eyes of American oil executives, whose fields and refineries were at the time supplying the vast majority of the Allies’ oil. In 1915, when President Woodrow Wilson was making plans to join England and France in the war, he summoned to a strategy meeting the chief executives of America’s top oil companies, asking what they would need from the government to ensure that a cheap and abundant supply of oil flowed from U.S. oil wells to European battlefields. This represented a U-turn in government-industry relations: not five years after the dissolution of Standard Oil’s trust, its new chief executives were in Washington deciding how they could cooperate—amongst themselves, and with their federal disciplinarians.
Wilson created a Petroleum War Service Committee and tapped A. C. Bedford, president of Standard Oil of New Jersey (later Exxon), to lead it. Bedford, a cutthroat executive who had worked at Standard Oil for more than thirty-five years, saw an opportunity that would extend well into the postwar future. “He and his committee of fellow oil company presidents proposed that supplies be pooled and efforts coordinated to produce all possible oil,” wrote historian Carl Solberg. “Overnight, the industry, with President Wilson’s support, was doing what the Sherman Antitrust Act forbade.”
It didn’t stop there. Industry leaders made a plea for a substantial tax break wrapped in the battle flag of patriotism. Bedford made the case that “if America were to have enough oil to win the war, Congress must create greater inducements to produce the stuff,” Solberg wrote. A so-called depletion allowance was established, eventually granting a 27 percent tax deduction for any investment made by U.S. petroleum companies to discover new oil.
As the war came to an end in late 1918, oil industry leaders formed the American Petroleum Institute, and installed Bedford as president. This was the nation’s first organization designed to protect the industry’s interests and guide its influence in public policy making. At the top of the Institute’s agenda: extending the wartime tax breaks and opening western public lands to prospectors.
In the postwar years, U.S. oil companies advanced steadily into overseas markets. Already the industry had established itself as America’s first multinational enterprise—remember Rockefeller’s initial mission to bring “new light” to the world’s darkest corners—but World War I accelerated that trend. Thanks to the celebrated success of trucks, automobiles, and oil-powered ships during the war, the Age of Mechanization shifted into high gear. The mass production of gas-powered vehicles for the war (more than 160,000 were constructed for Allied troops) dramatically reduced the cost of these conveniences for mainstream consumers in Europe and at home.
The Standard spin-offs quickly expanded their operations throughout Western Europe, Russia, and Asia. Soon they had more foreign customers than domestic. The United States was, in today’s terms, the Saudi Arabia of the world, a country whose vast plains, deserts, and ranch lands supplied the majority of the world’s oil—and would continue to do so for several decades.
“After the Great War,” Yergin told me, “there was a surge of consumption as automobiles began to crowd city streets and a new lifestyle based on cheap oil took hold. That’s when Americans began to perceive low-cost travel, cheap electricity, and affordable heating almost as a right conferred by our democracy.” In 1923, when English writers Davenport and Cooke visited the United States during its postwar oil heyday, they reported:
Travel but a little in the