In answer to this — assuming that the refining interest of Cleveland is a unit in this corporation, that of Pittsburg another, that of New York another, and that of Philadelphia another — it follows that it is immaterial to the stockholders of the "South Improvement Company" whether the oil produced at the Oil Regions is refined by them at their works in Cleveland, or at Pittsburg, or in New York, or in Philadelphia. It would not affect their dividends at all, provided they refined the oil at the cheapest point for them to do so. That place might be Cleveland; it might be Pittsburg, or it might not be either of them; but it might be New York or Philadelphia. Therefore, so long as it is for the pecuniary advantage of this combination to refine at Cleveland they may do so, but no longer, and should it be for the interest of the combination to discontinue their works at Cleveland, what would become of the oil-refining interest at this point? That question everyone can answer. Therefore I see little weight to the argument used that this monopoly is for the benefit of Cleveland. Hence, I do not consider the special danger to Cleveland by any means as averted.
But without discussing this position, its advantages or disadvantages, as an oil-refining center — for it has both in a marked degree — on general principles I will assert that the laws of business and manufacturing interests, like the laws of supply and demand, are unchangeable, and that a prosperity such as this monopoly would bring us is a forced prosperity, consequently not permanent, but temporary and fictitious in character, and damaging in its ultimate results; and more than all this, if the refining prosperity of Cleveland could be re-established permanently by means of the success of this monopoly, we could not afford to accept it at the cost proposed, viz., that of enriching ourselves at the expense of those who are weaker, but are in power.
We have just refused to build an opera-house because we should, by using the only means we could command to do so, compromise our morality. How much more emphatically should we refuse to accept any benefits to our city which have their origin in unmitigated fraud! In the opera-house instance just cited the managers use no compulsion, no unwilling man was to be forced by them to buy a ticket and take his chances; but the South Improvement Company force every producer to take a less price for his oil without rendering him an equivalent.
They force every refiner who is in their way to prosecute his business against them as competitors at fearful odds, and perhaps at the expense of a royalty on every barrel; or to sell his works and abandon his business to the South Improvement Company at any paltry price they may dictate.
They also force every consumer of oil on this broad continent, after paying all the legitimate cost of producing, refining, and transportation on oil, to pay them also an additional tribute — for what? Absolutely nothing.
The railroad companies derive their existence and power to act under charters granted them by the citizens (through their Legislatures) of the several states in which they exist. This charter is a contract made by and between the citizens of the one part and the railroad company on the other, and both parties bind themselves alike to the faithful performance of the conditions of the contract. One of the fundamental provisions of this contract is that there shall be no discrimination shown to any individuals, or body of individuals, as to facilities or privileges of doing business with such railroad company; on the contrary, the railroad company is expressly required in all cases to charge uniform rates for the transportation of freight and passengers.
They must, if desired, carry the freight for A that they do for B, AND ALWAYS AT THE SAME PRICE. Any deviation from this stipulated condition is a wilful and fraudulent violation of their contract. If it is by means of such violations of contracts on the part of the several railroad companies connected with them that the South Improvement Company expects success, then the whole gigantic STRUCTURE IS ESTABLISHED UPON FRAUD AS A BASIS, AND IT OUGHT TO COME DOWN.
Very respectfully,
F. M. BACKUS.
CLEVELAND, OHIO, March 5, 1872.
The oil men now met the very plausible reasons given by the members of the company for their combination more intelligently than at first. There were grave abuses in the business, they admitted; there was too great refining capacity; but this they argued was a natural development in a new business whose growth had been extraordinary and whose limits were by no means defined. Time and experience would regulate it. Give the refiners open and regular freights, with no favours to any one, and the stronger and better equipped would live, the others die — but give all a chance. In fact, time and energy would regulate all the evils of which they complained if there were fair play.
The oil men were not only encouraged by public opinion and by getting their minds clear on the merits of their case; they were upheld by repeated proofs of aid from all sides; even the women of the region were asking what they could do, and were offering to wear their "black velvet bonnets" all summer if necessary. Solid support came from the independent refiners and shippers in other parts of the country who were offering to stand in with them in their contest. New York was already one of the chief refining centres of the country, and the South Improvement Company had left it entirely out of its combination. As incensed as the creek itself, the New York interests formed an association, and about the middle of March sent a committee of three, with H. H. Rogers, of Charles Pratt and Company, at its head, to Oil City, to consult with the Producers' Union. Their arrival in the Oil Regions was a matter of great satisfaction. What made the oil men most exultant, however, was their growing belief that the railroads — the crux of the whole scheme — were weakening.
HENRY H. ROGERS IN 1872
Now President of the National Transit Company and a director of the Standard Oil Company. The opposition to the South Improvement Company among the New York refiners was led by Mr. Rogers.
However fair the great scheme may have appeared to the railroad kings in the privacy of the council chamber, it began to look dark as soon as it was dragged into the open, and signs of a scuttle soon appeared. General G. B. McClellan, president of the Atlantic and Great Western, sent to the very first mass-meeting this telegram:
NEW YORK, February 27, 1872.
Neither the Atlantic and Great Western, nor any of its officers, are interested in the South Improvement Company. Of course the policy of the road is to accommodate the petroleum interest.
G. B. MCCLELLAN.
A great applause was started, only to be stopped by the hisses of a group whose spokesman read the following:
Contract with South Improvement Company signed by George B. McClellan, president for the Atlantic and Great Western Railroad. I only signed it after it was signed by all the other parties.
JAY GOULD.
The railroads tried in various ways to appease the oil men. They did not enforce the new rates. They had signed the contracts, they declared, only after the South Improvement Company had assured them that all the refineries and producers were to be taken in. Indeed, they seem to have realised within a fortnight that the scheme was doomed, and to have been quite ready to meet cordially a committee of oil men which went East to demand that the railroads revoke their contracts with the South Improvement Company. This committee, which was composed of twelve persons, three of them being the New York representatives already mentioned, began its work by an interview with Colonel Scott at the Colonial Hotel in Philadelphia.