Nowhere are boom-and-bust economic cycles more dramatic than in the oil industry, with its rapid swings between wild abundance and scarcity. The story of Spindletop bears this out in full color: first the massive field was discovered, then oil fever set in and brought with it overzealous drilling, then the tremendous supply this yielded far outpaced demand, in turn creating a glut in the market that caused oil prices to plummet. When Spindletop was first discovered in 1901, Lucas sold his crude for $1 a barrel, but by the time the field was producing at its peak volume, overproduction had sunk the price to 3¢ a barrel—cheaper than the drinking water that was carted out to the field’s workers. When the oil bed began to dry up a year later and demand caught up to supply, prices then predictably began to soar.
Spindletop had one significant distinction from the majority of active fields of its era that worked both in its economic favor and against it: its oil was a lightweight sulfurous variety of petroleum that was not well suited for using as a lubricant or burning in lamps—the two biggest markets for oil at that time. Spindletop’s crude was, however, compatible as a fuel for tanker ships, locomotives, and generators—machines that were mostly coal-fired at the time. It also worked to fuel the automobile—a new European invention that had debuted in the American market just a few years before the Spindletop find.
“It is the most fortunate thing that could have happened in connection with this well—that it is not illuminating oil,” J. H. Galey, a part owner of the Lucas well, told the Dallas Morning News soon after the discovery. “[T]here will be a good market for fuel oil when the country has had time to adjust itself to using liquid oil. The railroads will use it, every factory will make steam with it, and the steamships can carry much more power in oil than they can in coal.” What Spindletop produced, in other words, was a sudden volume of cheap fuel that had nowhere to go but toward transportation. “Spindletop transformed the fuel of light into the fuel of engines,” as wildcatter Michel Halbouty told me. Over the subsequent decades, the new cheap engine fuel would set dozens of other mechanized industries in motion, in turn helping to build a young democracy into an industrial and economic powerhouse.
In the meantime, there was much work to do in Beaumont. By 1902, hundreds of oil companies had been chartered to manage the economic risks associated with petroleum production and steer the whirlwind of activity. The building of refineries became just as important as the drilling of wells—crude was worthless until it could be processed. Wildcatters, investors, and refiners brokered casual partnerships—many over whiskeys at local saloons—that in some cases grew into corporations we still know today. Exxon (formerly Humble Oil), Texaco (formerly the Texas Company), and Gulf Oil all had their beginnings in Beaumont. Gulf Oil, for instance, was an outgrowth of Anthony Lucas’s legendary first gusher: William Mellon, one of the investors who had backed Lucas and then bought him out, also purchased many other successful wells in the area and established a refinery business, and the sum of these parts became Gulf.
The Texas Company, meanwhile, was founded by Joseph Cullinan, known as “Buckskin Joe” for his tough, unyielding persona. A former employee of Standard Oil’s pipeline division, Cullinan raced to the scene of Spindletop after the discovery and soon became one of Beaumont’s most successful oilmen. As he snatched up valuable leases in Beaumont, Cullinan also began building storage facilities 20 miles outside of town, giving him a big advantage over the majority of wildcatters who overlooked the need for infrastructure. He also built a pipeline from Texas to Oklahoma, establishing a major artery of southwestern petroleum distribution. By the end of 1901, he had begun consolidating his various oil producing and distributing operations into the Texas Company.
Mellon and Cullinan were among the many independent oil producers who grew out of Spindletop—brash, confident risk takers with keen instincts and the will to follow them. They quickly became formidable economic forces to reckon with—specifically, for Standard Oil to reckon with. By 1902, an estimated $235 million had been invested in the Texas oil boom alone. Standard Oil, the titan of the Northeast, was valued at less than half that: $100 million.
THE FIRST TYCOON
Looming two thousand miles north of the Texas bacchanal, at his Manhattan headquarters at 26 Broadway, was John D. Rockefeller. A pious, bespectacled, and impossibly austere man, Rockefeller had extraordinary reserves of restraint and self-control in an industry with barely a trace of either.
Rockefeller’s entrepreneurial instincts took hold in high school, when he dropped out his senior year to study banking, bookkeeping, and law at a professional school near his family’s home in Cleveland, Ohio. Three years later, with a partner and $1,000 of his own savings, he set up a company that packaged and distributed regional crops and meats. Just as Rockefeller was growing his young company, Edwin Drake discovered oil less than 150 miles away in Pennsylvania. As he watched demand for the illumination fuel escalate, Rockefeller became convinced of its enormous commercial potential. He acquired his first refinery in 1863, at the age of twenty-four, and had achieved near-total dominion over the production and distribution of oil in the United States by the age of forty.
A compulsively orderly and fastidious man, Rockefeller was never interested in the grimy, frenzied oil-prospecting side of the industry; it was making the end product and selling it to customers that intrigued him. He realized early on that it was much more profitable to let the wildcatters take the risks—let them grapple with the inevitable fluctuations and uncertainties of production—while he maintained tight control of the refining, marketing, and distribution of petroleum goods. Rather than fall victim to the fear and havoc created by boom-bust cycles, he found a way to benefit from them. Cheap oil prices offered him a chance to increase his stake in the market.
I sought out some insight on Rockefeller’s business acumen from Daniel Yergin, who invited me to his house. The walls were lined with history books, oil paintings, and tchotchkes from his many visits with industrial leaders of Russia, Asia, and the Middle East. Though Yergin spends much of his time analyzing reams of industry data, he takes a raconteur’s approach to the subject of oil, conveying its details as though reciting verses about mythic heroes and their deeds. “Rockefeller believed in oil,” he told me, clenching a fist for emphasis. “He knew in his gut that the market moved in cycles. So whether prices were high or low, whether there was flood or shortage, he was unfazed by short-term fluctuations and relentlessly focused on the future. Any drop in the price of oil was not a reason for despair but an opportunity to buy.”
Rockefeller’s mission was to buy up not just crude but also his competitors. Putting the competition out of business and acquiring their refineries, pipelines, and delivery fleets, as Rockefeller saw it, generated a positive feedback loop: the greater his control over refining and distribution, the more he could control the price of oil, therefore the better his position to topple more of the competition and amass a still-larger share of the market. When Rockefeller founded Standard Oil in 1870, there were some 250 refinery operations in the Northeast, Yergin explained, and by 1880 there were just a handful—and more than 85 percent of that market was under his control. Rockefeller’s reach extended far beyond refining: he aimed to commandeer all stages of the flow of oil, from the moment it surged from a derrick to its processing, packaging, and transportation to store shelves and gas pumps.
Standard Oil quickly became the most recognizable brand-name product in America. “That notion of this light fuel being standard—being reliable, consistent, and safe wherever you used it—was really a novel concept at the time,” Yergin explained. “Rockefeller created a national product in a country that had never had national products. We now think of brand names as a part of our lives, but they didn’t really exist until the Standard brand emerged.”
For all his success in spreading light and unlocking the power of the hydrocarbon, Rockefeller exhibited very little of the wildcatter’s exuberance for his product. He was as obsessed with controlling his words and emotions as he was with controlling volatile markets. A devout Baptist and lifelong Sunday school teacher,