Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-01-05
At TACK ON STANDARD
Hot Shot From Herbert Knox
Smith.
DENIES COMPANY'S CLAIMS
Says It Has Consistently Raised
Prices for Ten Years.
ACCUSATIONS OF BRIBERY
Commissioner Withholds 1nforma-
ton, at Presidents Request, for
Further Prosecution of
Great Concern.
ACCUSATIONS OF BRIBERY

Mr.. Smith asserts that his report dis
proves the claims made by the Standard
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. and adds
that on the contrary, 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
The statistical basis for this conclusion
is very broad" says Mr.. Smith, founded
upon a vast number of prices directly col
lected by the bureau from thousands OF
retail dealers throughout the country as
we'll as from various other sources, ar
ranged and averaged with the utmost
care. verified wherever necessary, and in
the final results apportioned or weighted
according to the amount of business or
quantity of the article involved.
Margin Indicates Profits.
"These results are given chiefly in the
shape of margins that is, the difference
In cents per gallon between the cost of
crude "oil which the Standard buys and
the prices of the products thereof which
it sells. These margins, of course. are
the really significant facts. representing
that part OF the price 1Or' WHICH the
Standard is responsible
prices of Oil products may rise or fall
slightly without affecting the profits of
the Standard, because of 4 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 difference between the price of crude
and the price of the finished products. is
always a true indication of price, policy
and profits.
1.-The tremendous, Importance of the in
crease in margins can be fully appre-
ciated only by consideration of the
enormous output of the Standard. The
average increase in the margin for the
products of both Pennsylvania and Lima
crude oil combined Gaking single years
and not. as above, groups of years. from
1898 to 1904 was over 2 cents per gallon,
and, allowing a very liberal estimate of
one-half cent per gallon (25 per cent? for
increase in the costs of production and
marketing during this period. the net
average increase in profit during these
seven years would thus be at least 10
cents per gallon. If the same increase
in profit be applied to the Standards en-
tire sales of all kinds of petroleum prod
ucts in the United States in 1904 the
profits for that year would be about
81 100000 more than they would have
been on the basis of the prices and costs
in 1898 AS matter of fact, the actual
increase of profits on its whole business
as stated hereinafter, was almost certain
ly more than this.
Similarly. for the year 1903, when the
prices of oil reached their maximum,
these prices would represent an increase
in the Standards profits on sales in the
United States that year of nearly $4,000
coo overfprices and costs in 1898.
.'TheseI Figures show conclusively the eff
feet of the domination of the Standard
on the amount that the public pays for
its oil.
Naturally an increase has also taken
place in the profits of the Standard by
reason of this price policy. The increase
in annual profits from 1896 to 1904 was
over $27.Oo0,6OO
Half a Billion Dividends.
THE total dividends paid by the Stand
ard from 1882 to 1905 were SOL 500, 9O4.50
averaging thus al per cent per year.
The dividends, however, were much less
than the total earnings. Exact informa-
ton a. to these earnings is available only
for the years 1882 to 1896 and for the
years 1903 to 1908. inclusive. The earn
ings for these years plus the dividends
for the other years down to 1906 in
elusive. amounted to about $T14,0O0,OO0
Moreover, from these figures the earn
ings in excess of dividends for the other
six years may be estimated with some
degree of correctness, and it Is srbstan-
of the Standard from 1852 to 1886 were
at least $19O,000OO0, and possibly much
more.
These enormous profits have been
based an investment worth at the
time of its original acquisition not more
than S75,000000.
Furthermore, the rate of profit on the
capitalization has increased greatly
From 1882 to 1896 the net earnings aver
aged about 10 per cent on the capital
,tet, a
while the average net earnings for the
period from 1903 to 1905 were about GS
per cent yearly.
1.-The evidence is absolutely conclusive
that it is the policy of the Standard Oil
Company to take full advantage of all
competitive conditions to impose the
highest prices possible and to extend
such non-cOmpettive conditions by ag
gressive price cutting calculated to drive
out rivals. The enormous profits Sc
cured over most OF the country enable the
Standard to carry out this plan very eff
fectively in those localities where price
cutting is demanded by this policy.
Secret Railroad Rates.
"These determinations in prices were
largely mede possible by the widespread
system of discrimination in railroad rates,
mainly secret, which was long enjoyed by
the Standard Oil Company until recently
exposed by this bureau IN its report on
the transportation of petroleum, pub
lisheded in May, 1906 The elaborate sys-
tenn of railroad discrimination, extending
as it did, over very large areas of the
country. allowed the Standard to place
its oils in any given section where it hap
pened to encounter competition at a cost
much below the cost to its competitors.
1t was shown in the bureaus report on
this subject that in several instances the
unfair advantage enjoyed by the Standard
in freight rates was alone much more
than a living profit Oh its oil business.
by your direction, in view of the pro-
ceedngs of the Attorney General against
the Standard Oil Company, some OF the
more detailed evidence secured by the
bureau regarding price discrimination is
at present withheld from publication: and
the same is true of evidence regarding
other unfair practices, the most important
of which are the maintenance of bogus
Independent companies, espionage over
the business of competitors especially by
pribing railway employees to disclose their
shipmerts), and deception as to the quail
ity of oils sold.