Los Angeles herald., 1907-08-05
CORPORATIONS COMMISSIONER
BLAMEs STANDARD
ACCUSES MONOPOLY OF RAISING
PRICE OF ITS PRODUCT
Herbert Knox Smith Submits Report
to President In Which He Exposes
Methods of Rockefeller
Concern
By Associated Press.

report submitted to President Roosevelt
by Herbert Knox Smith, commissioner of
| corporations concerning the operations
of the Standard Oil company.
In a previous report the means and
methods of the Standard Oil company
| were explained. The present report sets
forth the results of these methods and
the effect they have had on the consumer
| of oil and on the profits of the Standard
Oil company. Mr.. Smith says:
"The Standard OIL company is respon-
sible for the course of prices of petroleum
and it's products during the last twenty.
| five years. The Standard has consistently
used its power to raise the price of oil
during the last ten years not only abso-
lutely but also relatively to the cost of
crude oil.'
Standards Claim False
The Standard has claimed that it has
| reduced the price of oil; that it has been
| a benefit to the consumer, and that only
a great combination like the Standard
could have furnished oil at the prices that
| have prevailed.
Each one of these claims" says Com
missioner Smith. 'is disproved by this
report"
The increase in annual profits of the
Standard Oil company from 1896 to 1904
was over s27,OO0OOO. The report says:
1.-The total dividends paid by the
Standard from 1882 to 1906 were $551 1922 124.
j averaging thus 2415 per cent per year.
The dividends, however, were much less
| than the total earnings. 1t is substan-
TALLY certain that the entire net earnings
of the Standard from 1882 to 1906 were at
least $3.50, 100000, and possibly much more.
"These enormous profits have been
based on an investment worth at the time
of it's original acquisition not more than
$75 100000"
| Arraigns Standard
Following is Mr.. Smiths arraignment
of the Standard in his letter submitting
the lengthy report to President Roosevelt:
/ Sir-I have the honor to submit here
with the part of the report on the oil
industry that deals with prices and
profits.
From the point of view of the public
this is one of the most important parts
of the report. Previous reports on this :
subject-on the Transportation of
i Petroleum and on the Position Of the
Standard Oil Company in the Petro-
leum Industry"-have dealt chiefly
; with the methods used by the Standard
OIL company, the dominant factor in
/ the industry, to secure and maintain
that domination, and have described
. the extent and character of it's control;
i that is to say, the facts already made
public have had to do with means and
methods The present report, on the
such methods and the effect thereof
on the consumer and on the profits of
| the Standard Oil company.
The Standard Oil company is respon-
sible for the course of the prices of
petroleum and it's products during the
last twenty-five years. A former re-
port demonstrated that this company
has maintained it's dominant position
since 1874. The present report first
sets forth with great completeness the
course of such oil prices during the
more recent period practically for the
last ten years, long after the control
| of the Standard was complete and the
| industry had become well established.
| 1t then shows roughly the price his
| tory for the entire period from 1866, or
practically since the beginning of the
industry. This gives an opportunity
| to compare the course of prices during
| the earlier competitive period with the
course of prices during the later
monopolistic period. 1t shows what
these prices actually have been. 1t
also shows that they would have been
| lower during this later period under
| normal competitive conditions and In
the absence of any such overshadow-
| ing combination as has actually ex-
| listed.
| These prices show directly the effect
that the existence of this combination
has had upon the consumer, and also
| the results that have accrued to the
combination itself by way of profits.
| We can thus arrive at just conclusions
as to the way in which the Standard
| has used its great industrial power.
| The Standard has repeatedly claimed
| that 1t has reduced the price of oil;
that it has been benefit to the con-
sumer, and that only great combina-
\ ton like the Standard could have fur
nished oil at the prices that have pre-
| vailed.
Each of these claims is disproved by
| this report.
The Standard has consistently used
its power to raise the price of oil
during the last ten years, not only
absolutely but also relatively to the
cost of crude oil.
| Prices of oil products may rise or
fall slightly without affecting the pro-
| fits of the Standard because of
change in the price of the crude oil,
although the Standard also fixes
within certain limits even the price
| of crude But the margin" the diff
ference between the price of crude
and the price of the finished pro-
duct, is always a true indication of
| price policy and profits.
There are two varieties of raw
material of essential Importance
Pennsylvania crude oil and Lima
| crude OIL The crude oils of the other
| nelQS, DOtn Dy reason Ol luSiI NClJ
recent development and by reason of
marked difference in quality, do not
affect in any significant way the
prices herein considered.
The average margin between Penn
sylvania crude oil and the illuminate
ing oil sold by the Standard through
out the country, after deducting
freight costs, from September, 1897,
to the end of 1899, was 5.S cents per
gallon; from 1900 to 1902. inclusive,
cents per gallon; and from 1908 to
June, 1905, Sc cents, or an increase
of 1.S cents during these eight years.
| When it is remembered that from
OF cent to / cent per gallon consti-
tutes a good profit on the business,
the meaning of an increase Of 1S
cents in the last eight years covered
by this report is evident, even as ap-
piled to illuminating oil alone.
The relative average margin for
the combined products OF Lima crude
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