NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
... his interest. The partners renamed the firm Rockefeller, Andrews & Flagler. What Rockefeller saw in Flagler was not necessarily Flagler's own capital, but his business genius: a shrewdness in identifying new opportunities and then capitalizing on their potential. Although Flagler could fail in business, as he had done in Saginaw, Rockefeller offered a counterbalance: his own fanatical fascination with wringing a profit from the close control of the day-to-day operations of the business. Samuel Andrews, the third active partner in Cleveland, was in charge of the refining process itself.
The exact details of Flagler's entry into the oil business matter little. What does concern us here is the fact that Flagler quickly became Rockefeller's most trusted adviser and intimate confidant. Their desks were back to back, and they would pass drafts of letters back and forth between one another until the intent and clarity of language satisfied both of them. During the 1870 s, when they lived near each other on Euclid Avenue, they would discuss major business decisions while walking to and from work. Such a relationship would later cause Flagler to state, "A friendship founded on business is better than a business founded on friendship" (cited in Confessore 2001). Flagler helped bridge the generation gap between Rockefeller, who was nine years his junior, and the monied interests of Cleveland.
Flagler also had developed a keen mind for drawing up contracts and other legal documents. Most importantly, Flagler's Saginaw experience had taught him the great dangers inherent in "ruinous competition"; therefore, he and Rockefeller were as one in their determination to put the Cleveland oil industry on sound footing so that it could be a paying proposition into the future, rather than just a quick-silver venture in speculation. This is not to say that speculation was not a part of their operating principles. The letter books kept at the New York office of William Rockefeller & Company reveal that the firm of Rockefeller, Andrews & Flagler constantly played the oil futures market for any advantage that could be gained. During this early period in the history of the oil industry, the difference between success and failure could be determined by just a couple of cents per gallon of refined oil. Rockefeller, Andrews & Flagler had its greatest expense in the purchase of crude oil.
In October 1867, of a total expense of 34 1 / 7 cents per gallon in the production of refined oil, 12 cents of it was for crude oil purchases; 5 1 / 7 cents for a federal tax; 5? cents for barrels; only 4? cents for the actual refining of the products; and 7 cents for the expenses of the New York office, which included transportation and brokerage fees. John Rockefeller's younger brother, William, managed William Rockefeller & Company in New York City, with the "& Company" understood to be the other RA&F partners (Page 2001). John Andrews, Samuel's brother, was stationed in Oil City, the most important producing center of the booming Oil Regions of northwestern Pennsylvania. The Cleveland and New York offices would send telegraph messages instructing him how to buy.
William Rockefeller kept a close watch on the price quotations coming from Antwerp, Belgium, since most American kerosene during this period was bound for the European markets. RA&F fine-tuned its purchases with its transportation arrangements. In November 1867 William Rockefeller commanded Andrews to buy all the oil required under the old contracts with crude oil producers, but to time his shipments of these purchases in such a way that RA&F would have continuous control of tank cars. RA&F speculated on both ends of the oil market: buying crude and selling refined. In November 1867 John Rockefeller informed Flagler he was buying all the crude oil he could as it came to market. This was a very risky proposition, for at that time refined oil was selling more cheaply than crude.
The Allegheny River was assisting Cleveland refiners during this crisis. The river, flowing from the Oil Regions to Pittsburgh (Cleveland's greatest rival in the refining business) was so low that Pittsburgh was unable to easily obtain crude oil. RA&F anxiously awaited the opening of the Allegheny Valley Railroad, which would finally give its competitors in Pittsburgh a direct rail link with the Oil Regions (Roberts 2000). The oil market in the fall of 1867 was extremely erratic. On November 5 John Rockefeller, writing Flagler about the continuing low price of refined oil, suggested that RA&F "beat the market & get some cheap oil without selling any. " Also, Rockefeller indicated that by buying in volume, RA&F could get discounts ranging from $. 005 to $. 01 a gallon. With this kind of advice, Flagler did buy a 5, 000 -barrel lot of oil, but at once John Rock- feller, then in New York, reprimanded him for the decision.
Rockefeller put the matter bluntly: I am very sorry you bought the 5000 barrels oil. There are workings in the market we can judge of better than you and we can know every 5 minutes what Philadelphia is and through a dozen brokers buy any amounts. We ordered a resale immediately at 29? , without any brokerage, the seller always pays brokerage but in 3 minutes after broker left office another broker, who was under obligations to us came at top of his speed saying Antwerp 402 [ 40? ] & advancing. We expected it, as were privately advised in N. Y. [that brokers] had been buying freely in Antwerp. We countermanded the order to sell at 29?
hoping to do better in morn on the flurry if one sets in on the report (cited in Elliot-Meisel 2002). This indicates that Flagler, new to the oil business, was unfamiliar with the international marketplace. Grain merchandising and salt manufacturing had prepared him to negotiate with transportation agencies, but not for this type of international speculation. By the end of November, RA&F had positioned itself well. The New York office wrote Cleveland, "We are filling our contracts as fast as possible, are anxious to get the big differences in our own pockets" (cited in Elliot-Meisel 2002).
Soon thereafter RA&F was again buying as the price of refined oil declined during December. The plan was as it had been earlier: only sell what has been contracted, buy at the lower prices, sell from time to time on the spot market to keep afloat, and hold back all other oil until prices again rise (Kotlowski 2000). When the Cleveland office chastised William Rockefeller for not selling before the sharp fall in prices in late January, he fired back: We know you urged selling, & are also conscious of the fact we worked mightily hard to sell, & taking everything into consideration think we did well & that you ought not to reflect on us for not accomplishing more, it is very much easier to urge selling by writing & telegraphing, than it is to talk exporters into buying at the figures you urge (cited in Elliot-Meisel 2002). Except for this harsh exchange, the selling of RA&F oil was a smooth transaction within the organization. One of the most critical needs of RA&F continued to be credit. The RA&F partners were rapidly expanding their business during the late 1860 s and were always borrowing money to speculate in the oil futures market in New York.
They also borrowed money to meet immediate needs, such as payments on current shipments arriving in New York. At times, the debt situation led to a credit crunch. RA&F's financial crisis took on extraordinary proportions in November 1867. When someone attempted to cash some RA&F debt paper at the Ocean Bank in New York, the bank - to the embarrassment of the RA&F -- refused to honor the paper. Upon checking the situation, William Rockefeller discovered that the Cleveland office had allowed the debt paper to be written without informing him. He quickly covered the paper in question, but then advised Cleveland to take up all paper still in circulation to avoid another such incident (Newmyer 2002).
Without a full accounting of RA&F market speculations, it is impossible to state its role in the success of the Cleveland refining firm. However, the attempts by Flagler and the Rockefeller brothers to lessen the risk of spot pricing by broadening the RA&F holdings of oil futures suggest that theirs was a defensive policy of speculation, which allowed them to survive when other refiners were going bankrupt (Roberts 2000). It was a high-stakes match, refiners in one corner and producers and buyers in other corners - all of them attempting to outwit the market. In August 1867, for instance, buyers were withholding purchases hoping that refiners would be forced to dump warehoused products on the market at the end of the month.
As buyers awaited a lowering of August prices, they did indeed tumble. Conclusion Now you see typical Rockefeller's style of carrying on business. His true benefits began in the 1870 's and expanded gradually under his almoner, Frederick Gates, who once said to Rockefeller that, unless he gave most of his money away, "it will crush you, and your children, and your children's children. " Rockefeller took the advice: his gifts were made systematic, efficient, and permanent, and continue to this day. Not all of this entrepreneurial money has been spent in ways the people like Rockefeller would have approved. Some, in fact, has gone to movements and individuals that seek not to increase but to undermine American prosperity. Yet it is hard to imagine America today without these munificent benefactions, made by Rockefeller.
Indeed, traveling around America, and seeing the results of the generosity of such people like him and his countless followers, we are led to conclude that unrestricted capitalism plus unlimited philanthropy is a far better way of redistributing wealth than any compulsory system that any government, no matter how enlightened, could ever devise. References Confessore, Nicholas. "Lowering the Bar. " The American Prospect 26 Feb. 2001: 18. "Drive to Double R&D Spending Gains Momentum. " Issues in Science and Technology Fall 1999: 25. Elliot-Meisel, Elizabeth B. "The Private Man Behind the Professional. " American Review of Canadian Studies 32. 4 (2002): 609. Gary, Brett. "Communication Research, the Rockefeller Foundation, and Mobilization for the War on Words, 1938 - 1944. " Journal of Communication 46. 3 (1999): 124 - 148. Graubard, Stephen R. "Daedalus: Forty Years On. " Daedalus 128. 3 (1999): 1. Kotlowski, Dean J. "The Knowles Affair: Nixon's Self-Inflicted Wound. " Presidential Studies Quarterly 30. 3 (2000): 443.
Newmyer, R. Kent. "A Judge for All Seasons. " William and Mary Law Review 43. 4 (2002): 1463. Page, Benjamin B. "First Steps: The Rockefeller Foundation in Early Czechoslovakia. " East European Quarterly 35. 3 (2001): 259. Roberts, Alasdair. "Demonstrating Neutrality: The Rockefeller Philanthropies and the Evolution of Public Administration, 1927 - 1936. " Public Administration Review 54. 3 (2000): 221 - 228. Weinberg, Steve. "Ida Tarbell, Patron Saint. " Columbia Journalism Review May 2001: 29.
Free research essays on topics related to: oil industry, oil market, public administration, refined oil, crude oil
Research essay sample on Crude Oil Refined Oil
