The sun., 1907-08-12

towns can be appreciated only IN the hght
OF the fact that very small amount per
gallon constitutes a fair margin Of profit
on the investment In refining and market
ing OF petroleum products. A difference
OF about seven mills or gallon In the price
OF Illuminating oil may mean n difference
between profit OF 10 per cent. on invest
ment in refining and marketing and no
profit Ht all. But the actual difference In
the Standards prices among comp etitive
and non-competitive towns and areas.
after making all allowances for differences
In cost Of production and distributing. often
amounts to several cents per gallon. A
combination VIII ich can command the profits
thNt these figures imply over large areas
has therefore obviously a tremendous
weapon when IL enters on aggressive price
cutting against independent concerns.
The most accurate and complete data
were obtained by the bureau on this subject
directly from, the records OF the Waters
Pierce Oil Company, n Standard concern.
Arkansas. Oklahoma. Indian Territory.
Texas and part Of Missouri and Louisiana.
In 1900 the profits varied from 90 cent
in the st. Louis division OF this company
to cents per gallon in the north Texas
division. The first six months Of 1904
the profits were as follows: st. Louis di-
vision. 06 cent per gallon; east Texas and
Louisiana, 1.8 cents; Missouri, t.S CENTS
Arkansas, 2.s cents; south Texas. 3.3 cents;
central Texas, 3.5 cents; north Texas, a.
| cents. showing an extreme range OF profit
and OF course a correspondingly extreme
range Of net prices Similar inequalities
in local prices appear in the gasolene busi-
meas Of this company.
average State prices, even after deducting
| freight rates. rising from the uncertainty
as to the relative cost OF manufacturing the
oil sold in different States. This difficulty,
! however may be avoided by comparing only
those States which are supplied from a
single refinery or from group OF refineries
using the same crude oil and having a sub
stantial similarity Of conditions. In De-
cember 1904. the average price in Delaware
less freight was ~ cents per gallon: In
Pennsylvania il was 81 cents in New York
! State 10 cents. in North Carolina and New
| Hampshire 1913 cents. part OF South Caro-
| lima IA cents, i'm Florida 1913 cents, and in
part OF Georgia supplied from the same
source l3 cents, all with freight deducted.
! The figure for Georgia is 5.3 cents higher
| than that for Delaware.
~One of the most striking instances is in
! California, where the Standard carries oil
from its great refinery near San Francisco
several hundred miles by water and rail
and sells il i'm southern California for several
cents less than ia charged for the same oil
in san Francisco.
THAT these differences are not due to
differences in cost OF marketing arising from
the density Of population rs shown by
taking the prices for large cities in different
parts of the country.
These determinations were largely made
possible by the widespread system Of dis
elimination in railroad rates, mainly secret,
which was long enjoyed by the Standard
Oil Company until recently exposed by this
bureau in it's report on the transportation
OF petroleum published in May. 1906"
Ihe relations OF the Standard Oil Com
pany to the various railroads Of the country
in the purchase Of lubricating oil form
the final chapter Of the report. The trade
with railroad companies Of the United States
in mbricating oils for rolling stock. the re-
port says amounts to about "a. 500 900 per
year and in IN important branch Of the oil
indL stry. The report shows that there
are wide differences in the prices paid by
the diserent railroads for the same oils.
The Pennsylvania system paid less than
one-halr the invoice prices. and fortv-one
other roads Paid the full prices. When
railroad company receives a refund from
the invoice cost the price OF the oil is re-
duced by the amount OF the refund. As a
result Of this method the pennsylvania
system obtained its valve oil for 2a5 cents
per gallon: It's engine oil for 1871 cents,
and it's car oil for So cents. while other
roads paid for the same oils as much as
~ cents for valve oil. 2s cents for engine
oil and ~ cents for car oil.
lndependent oil refiners and iobbers.
the report saws bear witness that the luhri-
eating oils could be sold at not TO cvceed
one-half the invoice prices OF the Calena
Signal Oil Company. the concern through
which the STANDARD cOnuucts tnls DTuncn
Of it's business.
The reason for the favoritism shown to the
Pennsylvania system is explained by the
fact that the oil company was compelled
10 make low guarantees in order TO get the
roads business under the first contract
in 1865
The most important reason. however.
! for the friendly relations between the
Standard o.! and the Pennsylvania is due
| 10 the strong strategic position which the
Pennsylvania occupies in reference 20 the
! Standard. The railroad reaches nearly
all the independent refneries In the Eastern
oil fields, and it can deliver shipments
| 10 a larg &c part Of the population OF the coun-
| try. In view Of this fact. IL the Standard
dared to divert traffic from the Pennsvl-
vania as a punishment for not AGREEING
| 10 excessive prices for its luhricating oils.
| the railroad could retaliate by building
NJ the trade OF the independent concerns.
The report cites several instances In
which the Standard Oil Company used the
| powerful influence OF its enormous petrol
cum shipments az a club tc compel a rail-
road to buy its lubricating oils At excessive
prices.
vile Railroad Company the method. OF
the Standard are clearly brought out In
1903 the Galena Oil Company proposed to
increase the guarantees over per cent.
from what the road had been paying under
former contracts. While the matter was
under COneiOeTatlOn Jt,c vi
the Galena Oil Company left with the preei-
dent of the railroad a memorandum which
showed the amount of traffic the Galena
Signal Oil Company gave the Louisville
and Nashville in the way OF freight dur
ing the first nine and half months Of 1902.
This particular contract went TO an inde-
pendent concern, but in 1905 the road went
back to the Galena Oil Company for its
lubricants, in spite OF the fact that the in
dependent concern to retain the contract
offered a proposition which would have
saved the railroad sl4.oOc during the first
year OF the contract.
It is probable. the report says, that for
all lubricating oils bought from the STAN
dard by all the railroads in the United
States the excess in their payment over
the fair market value amounts TO con-
sidcrably more than $500 600 a year
The reason why the railroads submit to
the excessive prices charged by the Stan
dard Oil Company is explained by Ccm-
missioner Smith in the concluding para
graph Of the report.
atn all the material gathered on this
subject" he says. -there Is nothing to in
dcate a legitimate business reason why
the railroads Of the country should pay
the Standard g.. .OOo. 900 per year more for
lubricating oils than they would have to