174 GILBERT HOLLAND MONTAGUE 



ent companies, and it was only by the competition and by 

 the improvements of such companies that the cost of the 

 transportation had been reduced. Till 1870 the competition 

 of refiners was solely concerned with efficiency of production; 

 and, since this was to be gained only by refineries of $500,000 

 capitalization or more, there was concentration among the 

 stronger concerns and extermination of the weaker. By its 

 process of concentration, and solely on account of its superior 

 efficiency, the Standard Oil company of Ohio became in 1870 

 larger than most of its competitors, and produced 4 per cent 

 of all the oil refined. After 1870 the progress of the oil in- 

 dustry, generally, and the precedence of the Standard Oil 

 company, in particular, was to lie in the direction of cheaper 

 transportation exacted of the transportation companies by 

 the refiners. 



Opportunities for discriminating freight rates presented 

 themselves early. How the Standard Oil company availed 

 itself of the unique railway conditions and of the practices 

 common in the freight traffic of that time is one of the most 

 sensational episodes in the history of American railroads. By 

 1871 the New York Central, the Erie, and the Pennsylvania 

 railroads had completed connections that afforded them en- 

 trance to Chicago, and the great struggle for the traffic of the 

 west had set in. The roads were so poor, and the necessity 

 for revenue so great, that rate wars had begun as early as 

 1869, when the New York Central and the Pennsylvania roads 

 had secured connection with Chicago. With the entrance of 

 the Erie road, and, in 1874, of the Baltimore and Ohio, into 

 Chicago, the competition for traffic throughout the region of 

 the trunk lines became more imbittered. During the years 

 from 1869 till 1873 the agents of the roads met annually at 

 New York to agree upon freight rates; and afterwards, in 

 order to get traffic, they regularly broke their agreement. 

 Every year during this period fourth class rates from Chicago 

 to New York fell from about 80 cents per 100 pounds in Decem- 

 ber to about 25 cents in August and September. This reck- 

 less competition for traffic was extended to the oil regions. 

 The Pennsylvania railroad, which had the earliest and closest 

 connection with the center of petroleum production at Oil 



