The 1900’s – Big Oil

The 1900’s

The changes taking place at the turn of the century were like nothing ever witnessed by civilization. The invention of the ‘horseless carriage’ and the first powered flight in 1903 were just the beginning. The internal combustion engine had arrived and with it came the battle of oil versus alcohol as fuel for this new invention.

Theodore Roosevelt Quote
Theodore Roosevelt Quote

Under President Teddy Roosevelt, the ‘Free Alcohol’ bill is passed in 1906. The price of ethanol immediately dropped to $.14 per gallon compared to the $.22 for gasoline. Mr. Roosevelt took direct aim at Standard Oil and states “The Standard Oil Company has, largely by unlawful methods, crushed out home competition… It is highly desirable that an element of competition should be introduced by the passage of some such law which has already passed in the House, putting alcohol used in the arts and manufacturers upon the (tax) free list.”

Henry Ford was aware of the experimentation being conducted on ethanol and other bio fuels in Europe at this time and was a big proponent of lifting the US tax on ethanol. When Ford introduced the Model T in 1908 it was

1908 Ford Model T
1908 Ford Model T

designed to run on both gasoline and ethanol. Ford realized that most rural Americans had alcohol stills producing free alcohol for their owners and therefore the cost of fuel would not be a deterrent to buying his Model T for many Americans.

At the same time when President Roosevelt passed the “Free Alcohol’ bill in 1906, the government was before the Supreme Court trying to enforce the ‘Sherman Antitrust Act’ against Standard Oil. The Act passed in 1890 which outlawed monopolies. Standard Oil quickly came to the attention of the authorities and a legal action was brought against Standard Oil. After many years of litigation, Standard Oil eventually lost and was forced to dissolve and sell off its holdings into over 30 different companies.

In the action brought against Standard Oil, the government states that; “Rebates, preferences, and other discriminatory practices in favor of the combination by railroad companies; restraint and monopolization by control of pipe lines, and unfair practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; [and] espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent.”

The government identified four illegal patterns: 1) secret and semi-secret railroad rates; (2) discriminations in the open arrangement of rates; (3) discriminations in classification and rules of shipment; (4) discriminations in the treatment of private tank cars.

The government alleged that: “Almost everywhere the rates from the shipping points used exclusively, or almost exclusively, by the Standard are relatively lower than the rates from the shipping points of its competitors. Rates have been made low to let the Standard into markets, or they have been made high to keep its competitors out of markets. Trifling differences in distances are made an excuse for large differences in rates favorable to the Standard Oil Co., while large differences in distances are ignored where they are against the Standard. Sometimes connecting roads prorate on oil—that is, make through rates which are lower than the combination of local rates; sometimes they refuse to prorate; but in either case the result of their policy is to favor the Standard Oil Co. Different methods are used in different places and under different conditions, but the net result is that from Maine to California the general arrangement of open rates on petroleum oil is such as to give the Standard an unreasonable advantage over its competitors.”

Unfortunately, neither the Antitrust Act nor the legal action brought against Standard Oil prevented Mr. Rockefeller from becoming the owner of these new companies and not long after Standard Oil was dissolved, Mr. Rockefeller became the wealthiest man in the entire world thanks to the US Government!

Meanwhile, the growing of hemp ebbed and flowed with demand and the economy, but was generally in a steep decline partly due to cheaper imports from Manila, Africa and the Orient. That is… until the outbreak of World War I when production increased dramatically to help in the war effort.

Alcohol was again being talked about as an excellent choice as a fuel. Alexander Graham Bell says in 1917: “Alcohol makes a beautiful, clean and efficient fuel… Alcohol can be manufactured from corn stalks, and in fact from almost any vegetable matter capable of fermentation… We need never fear the exhaustion of our present fuel supplies so long as we can produce an annual crop of alcohol to any extent desired.”

Although hemp was being talked about as a potential answer, seed supply was an issue. The following 1918 report outlines the problem.

Pub date: May, 1918
Source: Bulletin 293 – Wisconsin’s Hemp Industry. Agricultural Experiment Station of the University of Wisconsin, Madison.
Author: A. H. Wright
This is an excerpt of the entire report.

Since the Civil War the production of hempseed has been almost entirely limited to the bottoms of the Kentucky River and its tributaries. In Kentucky some upland hempseed is produced each year, but its production is generally unprofitable and the amount grown of little consequence. In 1917 several thousand bushels of seed were produced outside of Kentucky, principally in California, Ohio, and Kansas. While hemp for fiber is a successful crop in the extreme northern states and in southern Canada, hempseed seemingly must be produced in sections farther south.

That Wisconsin farmers must depend upon Kentucky River bottom growers to produce seed is most unfortunate, and before a dependable supply of seed can be obtained it will be necessary to have it produced elsewhere, unless there is a radical change in the manner of handling and selling seed in Kentucky.

During the last few years the price of hempseed has been unstable. This condition of the market has not been due to a lack of seed to supply the demand, for each year several thousand bushels of seed have been held over, but it has been largely due to a complete lack of organization and to the activity of seed speculators. The price that the grower of fiber has been compelled to pay for seed has often been unreasonable, and such prices, together with the very unstable condition of the market, are seriously injuring the hemp industry, not only in Wisconsin but throughout the whole United States. The future safety and permanency of the industry in Wisconsin demands that a new and dependable source of seed be obtained. The Experiment Station in cooperation with the United States Office of Fiber Investigations has investigated prospective sections for establishing new centers of hempseed production and such work will be vigorously promoted.

Continue reading about Prohibition here!