The Washington herald., 1907-08-12
STANDARD IS GIVEN ANOTHER SCORING

SiBnal Oli company, WHICH IS ConLEOittG
by the Standard, and which has an al
most complete monopoly lver the lubri-
eating OH trade with the railroads.
Commissioner Smith has obtained re-
ports from ninety-fOur railroads through
out the country which are under contract
with the Galena-Signal oil Company to
purchase their iubricating oils from that
company. These contracts In the main
are similar in form. and contain two pri-
mary factors upon which the price paid
for the oil is based: First, the actual
gailonage of oil used at certain prices
per gallon, which are called invoice prices
and which are the same for ali roads: and
second. a guaranty that the cost Of Luz
brication 20 particular road shall not
exceed a certain amount per thousand
miles run by locomotives, passenger cars,
and freight cars, respectively.
Prices Differ widely.
These guarantees, unlike the invoice
prices. differ widely for the different
roads, and by means of very high IN
voice prices and such mileage guarantees.
the actual prices Of lubricants to any
road may be placed at the excessive in
voice prices, or at any desired amount
below them The railroad is charged for
the amount of lubricating oil ordered %
the basis Of the. invoice prices, but at
the. end OF the year the amount due
under the guarantees is computed on the
basis OF the number of miles run by the
locomotives, the passenger cars, and the
freight cars and IL this amount is be-
low the invoice cost charged, the oil
company refunds the difference.
The report shows that there are wide
differences in the prices paid by the dif
ferent railroads for the same oils. The
Pennsylvania system paid less than one
half the invoice prices. and forty-one
other roads paid the full prices. The
payments from the ninety-four roads
from which the bureau reports during
one year amounted to $4,Os7.974. and of
this amount a,512922 was paid at the
fun invoice prices. and S1.Oss, ,52l at over
70 per cent OF the invoice prices. The
total refund from the invoice cost 10 all
railroads was $S07, ,9S4. and about half OF
this went 10 the Pennsylvania system
Fifty-elght Of the railroads of the eoun-
try paid double the prices paid by the
Pennsylvania
How Pennsy Benefited.
When a railroad company receives a
refund from the invoice cost. the price Of
the oil is reduced by the amount Of the
refund. AS a result Of this method the
Pennsylvania system obtained its valve
oil for 23.5 cents per gallon. its engine
oil for 1S.7 cents. and its car oil for SIS
cents, while other roads paid for the
same oils as much as 4S csnts for valve
oil. 2S cents for engine oil. and is cents
for car oil.
The reason fer the favoritism shown
10 the Pennsylvania system by the Ca
lena-Signal Oil Company is explained BY
the fact that the oil company was com
PEELED TO make low guarantees in order to
get the roads business under the first
contract in 1896. before which time the
railroad company was compOunding its
own lubTicating oils. The railroad COM
pany. moreover. has refused 20 agree to
increases in the guarantees. except such
as II believed 10 be justified BY the in
crease in the weight of equipment.
Main Reason for Favoritism.
The most important reason. however
for the friendly relations between the
Standard OH Company and the Pennsyl.
yaTia Railroad system is due TO the strong
strategic position which the Pennsylvania
Ok cupies in reference to the Standard
The railroad reaches nearly all the in
dependent refineries in the Eastern oil
fields, and il can deliver shipments 10 a
large part OF the population of the coun-
try
in view Of this fact, II the Standard
dared TO divert traffic from the Penn
sylvania as a punishment for not agree
ng TO excessive prices for Us lubricating
Dils the railroad could retaliate bv build
ng up the trade Of the independent con-
Germs.
The report cites several instances IN
which the Standard OH Company used
the powerful influence Of It's enormous
petroleum shipments as a club 10 compel
A railroad to buy its lubricating oils at
excessive prices.
The Norfolk and Western Railway Com
Dany, since 1897. paid TO the Galena Sig
nal OIL Company about So per cent Of its
invoice prices on lubricants. and in 1864
he oil company attempted to increase the
guarantees under which practically no re-
'und would be paid to the carrier The
'ailroad sought bids from the independent
'efineries. One of these independent con-
ems submitted bid which meant a saw
ng TO the road Of about $4,000 a year. or
about one-half the payments that were
)eing made to the Galena OIL Company.
UnfavOrabIe 10 Standard.
A careful series Of tests Of the lubr,-
ants of the Standard and the independ-
mt concern were made, and the results
shown were unfavorable to the Standard.
The bid OF the independent refinery would
In the case Of the Louisville and Nash
lille Railroad Company the methods Of
he Standard are more clearly brought
'ut. In 1913 the Calena Oil Company pro-
'osed 10 increase the guarantees over s
Der cent from what the road had been
'aying under former contracts. While
he matter was under consideration the
representative Of the Galena OIL Company
eft with the president of the railroad a
memorandum which showed the amount
f traffic the Galena-S Signal OIL Company
ave the Louisville and Nashville in the
way Of freight during the first nine and
'ne-half months of 1902. This particular
onuact went to an independent concern.
'ut in 1906 the road went back TO the
Ialena OIL Company for its lubricants. in
pite Of the fact that the independent con-
ern' TO retain the contract, offered a
proposition which would have saved the
during the first year of the
ontract.
The invoice prices Of the Galena-Signal
u Company are about double, the report
avs the prices at which the oils could
e bought for under competitive condi-
ions. The total amount paid by ninety
our railroads of the country In one year
Fas S4061s74. Taking the prices charged
he Pennsylvania system as a basis. the
ayments would have been only $2.3S9. 9.219
eaving a difference OF H.67S. .755, which |
the excess charges for lubrl- !
ants m one year.
L.