page_title: Henry Flagler
section_title: Business and Standard Oil
hierarchical_section_title: Henry Flagler / Business and Standard Oil
caption_attribution_description: English: Postcard of former home of Henry M. Flagler and later D.M. Harkness Bellevue Ohio.
context_page_description: Henry Morrison Flagler was an American industrialist and a founder of Standard Oil, first based in Ohio. He was also a key figure in the development of the Atlantic coast of Florida and founder of what became the Florida East Coast Railway, much of which he built through convict leasing. He is known as the father of Miami and Palm Beach, Florida.
context_section_description: After the failure of his salt business in Saginaw, Flagler returned to Bellevue in 1866 and reentered the grain business as a commission merchant with the Harkness Grain Company. During this time he worked to pay back his stepbrother Stephen Harkness. Through this business, Flagler became acquainted with John D. Rockefeller, who worked as a commission agent with Hewitt and Tuttle for the Harkness Grain Company. By the mid-1860s, Cleveland had become the center of the oil refining industry in America and Rockefeller left the grain business to start his own oil refinery. Rockefeller worked in association with chemist and inventor Samuel Andrews.
  Needing capital for his new venture, Rockefeller approached Flagler in 1867. Flagler's stepbrother Stephen Harkness invested $100,000 (equivalent to $1.83 million in 2019) on the condition that Flagler be made a partner. The Rockefeller, Andrews & Flagler partnership was formed with Flagler in control of Harkness' interest. The partnership eventually grew into the Standard Oil Corporation. It was Flagler's idea to use the rebate system to strengthen the firm's position against competitors and the transporting enterprises alike. Flagler was in a special position to make those deals due to his connections as a grain merchant. Though the refunds issued amounted to no more than fifteen cents on the dollar, they put Standard Oil in position to undercut other oil refineries. By 1872, it led the American oil refining industry, producing 10,000 barrels per day (1,600 m³/d). In 1877, Flagler and his family moved to New York City, which was becoming the center of commerce in the U.S.. In 1885, Standard Oil moved its corporate headquarters to New York City to the iconic 26 Broadway location.
  By the end of the American Civil War, Cleveland was one of the five main refining centers in the U.S. (besides Pittsburgh, New York City, Philadelphia, and the region in northwestern Pennsylvania where most of the oil originated).
  By 1869, there was three times more kerosene refining capacity than needed to supply the market, and the capacity remained in excess for many years.
  In June 1870, Flagler and Rockefeller formed Standard Oil of Ohio, which rapidly became the most profitable refiner in Ohio. Standard Oil grew to become one of the largest shippers of oil and kerosene in the country. The railroads were fighting fiercely for traffic and, in an attempt to create a cartel to control freight rates, formed the South Improvement Company in collusion with Standard and other oil men outside the main oil centers. The cartel received preferential treatment as a high-volume shipper, which included not just steep rebates of up to 50% for their product but also rebates for the shipment of competing products. Part of this scheme was the announcement of sharply increased freight charges. This touched off a firestorm of protest from independent oil well owners, including boycotts and vandalism, which eventually led to the discovery of Standard Oil's part in the deal. A major New York refiner, Charles Pratt and Company, headed by Charles Pratt and Henry H. Rogers, led the opposition to this plan, and railroads soon backed off. Pennsylvania revoked the cartel's charter, and non-preferential rates were restored for the time being.
  Undeterred, though vilified for the first time by the press, Flagler and Rockefeller continued with their self-reinforcing cycle of buying competing refiners, improving the efficiency of operations, pressing for discounts on oil shipments, undercutting  competition, making secret deals, raising investment pools, and buying rivals out.  In less than four months in 1872, in what was later known as "The Cleveland Conquest" or "The Cleveland Massacre", Standard Oil had absorbed 22 of its 26 Cleveland competitors. Eventually, even former antagonists Pratt and Rogers saw the futility of continuing to compete against Standard Oil: in 1874, they made a secret agreement with their old nemesis to be acquired. Pratt and Rogers became Flagler and Rockefeller's partners. Rogers, in particular, became one
caption: Flaglers Gingerbread house in Bellevue, OH
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