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Blowout: Corrupted Democracy, Rogue State Russia, and the Richest, Most Destructive Industry on Earth


Splendor and Fragrance

If you had to point to a beginning, to the exact location of the big bang from which American industrial and economic power began its astounding and sometimes reckless expansion, it would be at the end of a percussion-driven, blunt-force drill bit, lowered through a cast-iron pipe, powered by a six-horsepower steam engine, slamming down and down and down into the earth on a farm in northwest Pennsylvania. At a depth of sixty-nine and a half feet, the operators of the drill struck what they had been looking for, and on August 28, 1859, the crude yet sublime substance—“rock oil,” as it was called at the time—presented itself on the earth’s surface.

That discovery, like the big bang itself, is but a subatomic pinhole in space compared with all that has followed. Edwin Laurentine Drake and his hired man, “Uncle Billy” Smith, pulled the equivalent of maybe twenty forty-two-gallon barrels of crude oil from the ground on a good day. The inhabitants of our planet weren’t exactly starving for more in 1859, or at least didn’t yet know they were. The first commercially viable gas-powered engine, and the ensuing addiction, were still a few generations away.

Today’s drillers produce an average of more than ninety million barrels of oil worldwide every day, and a lot of natural gas, too, which fuels cars, jets, freight trains, ocean liners, power plants, factories, and farm machinery, as well as the economies of republics, monarchies, and dictatorships around the globe. Nearly a hundred countries, representing six continents, are in the oil and gas game, and many have been in it for a century or more. But the United States got there first (Russia was a very distant second), and only the United States can lay claim to having shaped the industry’s prevailing culture: the tools of its trade, its financing, its administration, its ethic, and its reach. “The organization of the great business of taking petroleum out of the earth, piping the oil over great distances, distilling and refining it, and distributing it in tank steamers, tank wagons, and cans all over the earth,” the president emeritus of Harvard noted in 1915, “was an American invention.”

In fact, it could be argued, the oil business as we know it today was the invention of one particular American, John D. Rockefeller. Rockefeller was there almost from the beginning. He created and husbanded the exemplar of the industry, Standard Oil, and along the way he helped to popularize the idea of America as the testing ground where the extravagant possibilities and the outsized benefits of free-market capitalism have been proven. Rockefeller, a junior partner in a Cleveland merchant commission house trading in grain, hay, meat, and miscellany when Edwin Drake made his strike in 1859, watched the oil business unfold up close. When he entered the field in 1863, at age twenty-three, he understood his best bet was to concentrate on refining the crude oil and to leave to others the rather messy and costly process of actually getting it out of the ground.

Within ten years, Rockefeller had managed to get control of nearly all of the oil refineries in Cleveland, which had established itself as the nation’s main refining center. Rockefeller’s new corporation, Standard Oil, shipped a million barrels of refined oil in a single year. By 1875, thanks to the fire sale that followed the first frightening financial panic and depression in industrialized America, Rockefeller had taken control of every major refining center in the country. “We were all in a sinking ship,” he would later explain, “and we were trying to build a lifeboat to carry us all to shore. . . . The Standard was an angel of mercy, reaching down from the sky, and saying ‘Get in the ark. Put in your old junk. We’ll take the risks!’ ”

Standard Oil’s main product at the time was kerosene, which proved a welcome innovation in illumination. It was efficient, effective, plentiful, and reasonably priced. The most widely used lighting oil at the time, which was struck from soft coal, was dirty; whale oil was hard to get (see Moby-Dick) and dwindling in supply; kerosene from petroleum—or rock oil—was just the thing to illuminate the clean, bright new future. “Rock oil emits a dainty light,” promised the new industry. “The brightest and yet the cheapest in the world, a light fit for Kings and Royalists and not unsuitable for Republicans and Democrats.” Farmers and city dwellers could afford to read well into the night. Factory owners could afford to keep their works open around the clock. Rockefeller’s magic potion was a worldwide phenomenon; in 1875, before any European-based company was producing kerosene in bulk, 75 percent of the output from Rockefeller’s American refineries was loaded up and shipped overseas. Cash flowed back across the Atlantic. Standard’s production capacity grew year after year. The efficiencies that followed—economies of scale—allowed Rockefeller to cut the cost of refining by more than 85 percent and to cut the cost to the consumer by 70 percent. Demand swelled, and so did revenues.

Rockefeller’s company, meanwhile, just kept eating would-be competitors. About 90 percent of America’s crude flowed through Standard Oil by the end of the 1890s. The company had money and means to produce its own crude, and refine it, and get it shipped to market on its own (always favorable) terms. Standard was capable of controlling the price of oil and railroad freight rates and had cash in the bank to pay off the state and federal legislators who wrote laws governing the industry. “John D. and his colleagues regarded government regulators as nuisances to be bypassed wherever possible,” says Rockefeller’s estimable biographer, Ron Chernow. “He felt that politicians were basically parasites who would shake down businessmen. I mean, all of this bribery he saw as extortion; that is, the politicians shaking him down, rather than his paying off the politicians. . . . I think he regarded these payments really as a business expense.”

Standard Oil eventually grew into “the largest business empire on earth,” according to Chernow. “I don’t know that the business world has ever seen an agglomeration of wealth and power on the scale of Standard Oil.” This was the era of consolidation, of the Big Trust, which was nineteenth-century parlance for monopoly—the Sugar Trust, the Beef Trust, the Steel Trust, the Tobacco Trust, the Rope-and-Twine Trust. But the Rockefeller-controlled Oil Trust was the first, the biggest, the most powerful, and easily the most talked-about trust in the country. Rockefeller himself stood with Andrew Carnegie (steel), Philip Armour (meat products), and James Buchanan Duke (cigarettes) as the richest and most powerful commodity producers on the continent. They sat on mounds of private wealth unimaginable in the young republic at the time of Rockefeller’s own birth. John D. died nearly fifty years before the debut of the Forbes 400, the annual listing of the wealthiest private individuals in the country. But when the editors of a book timed to coincide with the twenty-fifth-anniversary edition of that list made some calculations, they declared Rockefeller the richest single individual in the history of America. They figured his peak net worth at $305 billion (in 2006 dollars), which means that if John D. were to be magically reanimated today, with his peak fortune still intact, his personal wealth would roughly triple that of the whippersnapper who sat atop the Forbes list in 2019.

Millions of barrels of ink have been expended in trying to explain the reasons for Rockefeller’s spectacular achievement, to reveal the cardinal (and perhaps replicable) tactic, to pinpoint the specific innate genius that made it all happen. Theories abound. Take, for instance, what could be called the Bung Theory. A bung is the stopper once used to seal up a barrel of oil, and Rockefeller’s intense interest in this unromantic industrial cog, his keen watch on the monthly bung count, offers a tantalizing lead on the secret to his success. “Your March inventory showed 10,750 bungs on hand,” Rockefeller once wrote to one of his foremen. “The report for April shows 20,000 new bungs bought, 24,000 bungs used, and 6,000 bungs on hand. What became of the other 750 bungs?” Maybe the key was pinching every penny! John D. Rockefeller wasted nothing, see, so he could push his costs down, undercut all competitors on price, and drive them out of the business, or at least into Standard Oil’s angel of mercy ark.

Then there is the well-traveled Great Monster Theory. “Run, children, or Rockefeller’ll get you,” was a threat that could strike terror in the Pennsylvania oil patch in the late nineteenth century. The Great Monster Theory gained much currency in the popular mind after Ida Tarbell’s remarkable series of investigative articles published in McClure’s Magazine beginning in 1902, “The History of the Standard Oil Company.” Tarbell, who grew up in the patch, itemized the more than thirty years of Rockefeller’s underhanded, corrupt, predatory behavior that constituted his effort to wipe the field of competitors. He was, in Tarbell’s rendering, a rapacious and devious villain. Widows and orphans, beware. It didn’t hurt that Rockefeller, aged sixty-three at the time of publication, looked ready to inhabit the villain role by then. He was already growing thin and pinched—and worse. “He suffered from something called alopecia. In 1901, he lost not only all the hair on his head; he lost all body hair,” Chernow explains. “Ida Tarbell came along a year later, did this series portraying him as a monster. And since he was hairless and suddenly looked old—and ghoulish—his appearance seemed to ratify what she was saying in the series, so that the timing was particularly unfortunate for Rockefeller.”

There is also the Man of His Times Theory. Rockefeller, this theory posits, was simply playing by the very loose set of rules of his day, just like everybody else was. The boundaries of capitalism and democracy in America were still being chalked, the rules of the game still being written. The prevailing ethic was best summed up by one of Rockefeller’s early partners, Henry M. Flagler, who kept a copy of this little ditty on his desk: “Do unto others as they would do unto you—and do it first.” The point of the free market was not to compete but to win. “The most serious charge that can be laid at [Standard’s] door is that it has succeeded,” wrote an oilman who felt compelled to sell out to Rockefeller in the 1880s or suffer the consequences. “It has outwitted its competitors who sought to play the same game but had not so thoroughly mastered the art. . . . In the business battle, the extremity of one is the opportunity of the other. . . . It is the rule of our competitive life that the time when the business rival is on the downward road—when creditors are pressing him hard, when banks are clamoring that he shall meet his paper, when the sheriff is threatening to close his doors—this is the opportunity for the other rival to strike the finishing blow and make merchandise out of the misery of his fellow-man.” Rockefeller’s eldest son and heir offered an exceedingly aromatic metaphor to justify this need to (occasionally, of course) rely on cutthroat tactics. “The American Beauty Rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it,” John D. junior sermonized. “This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of God.”

Rockefeller himself had a number of pet theories about his spectacular rise. A devout and puritanical Baptist, John D. was certain there was a higher being at work. “I believe the power to make money is a gift from God,” he explained to one writer, “just as are the instincts for art, music, literature, the doctor’s talent, the nurse’s, yours—to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money, and to use the money I make for the good of my fellow man according to the dictates of my conscience.”

These various theories, and the many others in circulation, are not mutually exclusive. The whole truth of John D. Rockefeller is complicated and involves pieces of them all. But the rock-bottom fact on which everything else rests is actually quite simple: Standard Oil just kept turning out the finest product on the market, at the lowest price to the consumer. Ka-ching!

Blowout: Corrupted Democracy, Rogue State Russia, and the Richest, Most Destructive Industry on Earth
by by Rachel Maddow