Los Angeles herald., 1907-08-12

business at O loss. 1t Is thus apparent
that discrimination In railroad rates Is
intimately Identified with discrimina-
ton in prices.
Corners Lubricating Market
A special and important branch OF
the oil industry is in the selling of
railroad lubricants. Certain very re-
markable facts characterize this bust
ness. The trade with railroad COM
panies of the United States Is lubricat-
ing oils for rolling stock amounts to
about 81, 500,00 per year. The Standarf
Oil company, through the Galena-
Signal Oil company, which 1t controls
has an almost complete monopoly
therein, certainly over IS per cent of
this business.
The system upon which the lubricat-
ing oils are sold to the railroads is
somewhat unusual Each contract
contains certain invoice prices per
gallon Of oil, which are to be paid I'M
less reduced by other provisions of the
contract. These Invoice prices are
excessively high, and are the same In
all contracts. But there is also In each
contract a second factor, the mile
age guaranty" BY This guaranty the
oil company agrees that the cost or
fabrication to a particular road snail
not exceed a certain amount per thou
sand miles run by locomotives, pas
senger cars and freigh cars. These
guarantees, unlike the invoice price,
differ widely for the different roads.
BY means of such mileage guarantees,
the net price of lubricants to a given
road may be placed at the excessive
invoice price, or at any desired amount
below them.
mt. kha fnH YlFinRE
per gallon are as follows: Valve oil,
As cents; engine oil, 2S cents coach oil,
80 cents; car oil, IS cents. Reports
were received from ninety-four rail-
road companies, which operate about
91.5 per cent of the locomotives and
car mileage of the country, all under
contract with the Galena-Signal OIL
company. BY reason of the very low
price 1t has paid over period of ten
years, as compared with other roads,
the Pennsylvania system stands in
class by itself Through the mileage
guarantees, widely different prices have
been made to railroad compani Tor
the same oils, as is shown by the fol-
lowing statement of average prices
paid for valve oil:
The Pennsylvania system paid 23.5
cents per gallon, eight roads averaged
27.7 cents, twelve roads 35.7 cents, ff-
teen roads Al cents, seventeen roaoS
As 9 cents, and forty-one roads az cents.
The prices paid for the other oils were
in, exactly the same proportion as
those cited for valve oil. The impor-
lance of the fifty-eight roads In the
two classes last mentioned is SHOWN
by the fact that in one year they PAID
$2,600,0 600 at prices which averaged
=. 4
The Galena- Signal Oil company has
continued under successive agree
ments, which 1t has had ample oppor-
tunity to terminate, to sell these lubri-
eating oils to the Pennsylvania during
the past ten years at prices which were
about one-half the invoice prices, and
some few other roads have had equally
favorable contracts. Moreover, the
calculations made by the Pennsylvania
as to the cost at which 1t could COM
pound it's own lubricants from OILS
bought in the open market, as well as
statements made by independent oil
companies, show that the prices paid
by the Pennsylvania can be used as a
standard of reasonable price by which
to Judge the excessive prices paid by
nearly all other railroads in the coun-
try.
Coerces Railroads
Absolutely no satisfactory explana-
ton has been given for the excessive
prices paid by nearly all railroads.
They must be attributed solely to the
fact that the Standard, which controls
the Galena, is powerful enough, either
by reason of its enormous shipments
of petroleum products or by It's in1lu-
ence in financial circles. to induce most
of the railroads of the country to pay
excessive prices for their lubricants.
Two typical instances of this character
may be cited:
The Norfolk & Western Railway
company has been unuer contract
with the Galena since 1897, and dur
ing that time has paid about So per
cent of the invoice prices, as against
the Pennsylvania payment of about
40 per cent. In 1905 the Norfolk Dc
Western made a careful and elabor-
ate service test of the oils of the Ga
lena and two of it's competitors.
These tests resulted in favor of the
Union Petroleum company, an indie
pendent concern of undoubted finan-
cial standing and business reputation.
Nevertheless, the contract was finally
closed with the Galena-Signal OH
company in the face of the fact that
the net prices (taking account OF
mileage guaranties) offered by the
Union Petroleum company were 81
per cent lower than those of the con-
tract made with the Galena, and that
IL the bid of the former had been ac-
cepted the Norfolk & Western would
have saved about $4,000 year.
A similar instance was that of the
Louisville & Nashville Railroad COM
pany, which was under contract with
the Galena from 1897 to 1902. During
1902 this road paid SO per cent of the
invoice prices. as against the 40 per
cent paid by the Pennsylvania, and
yet the oil company proposed to In
crease the guarantees so that the full
invoice prices would be paid. A MEM
orandum which the purchasing agent
submitted to the president of the rail-
road company along with this proposal
throws considerable light on the meth
DDS of the Galena:
Attached to the papers is a memo
randum left by Mr.. - "a representa-
tive of the Galena), which he was anx-
shows the business his company gave our
road in the way of freight during the first
nine and one-half months of 1902
The railroad made a contract for
two years. from March l, 1903, with
another competitor, the New York
Lubricating Oil company, at prices
so much lower that for the two years
OF this contract the railroad company
paid $4,000 less than 1t would have
paid had 1t made the contract offered