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What was the core business that made Standard Oil a horizontally Integrated Monopoly?

What was the core business that made Standard Oil a horizontally Integrated Monopoly?

Standard Oil became a powerful monopoly by controlling the oil refining business. Here’s how they did it:

  1. Oil Refining as the Main Business

  • Focus on Refining:

    Standard Oil, started by John D. Rockefeller in 1870, mainly worked on refining oil. Refining is the process of turning crude oil into products like kerosene and gasoline that people can use. This was the most profitable part of the oil industry.
  • Dominating the Market:

    Rockefeller wanted to control as much of the oil refining business as possible. By the 1880s, Standard Oil controlled about 90% of the oil refineries in the United States, making it the most powerful company in the industry.
  1. Horizontal Integration

  • What is Horizontal Integration?:

    Horizontal integration is when a company buys or merges with other companies that do the same thing. In this case, Standard Oil bought other oil refineries. This helped the company control a larger share of the market.
  • Standard Oil’s Strategy:

    Standard Oil used horizontal integration to grow by buying out other refineries. Rockefeller often bought other companies or forced them to sell at low prices. By doing this, Standard Oil got rid of a lot of its competition.
  1. Eliminating Competition

  • Aggressive Tactics:

    Standard Oil used tough tactics to beat its competitors, like starting price wars, making secret deals with railroads for cheaper shipping, and forming alliances with other companies. These moves made it hard for other refiners to stay in business.
  • Creating a Monopoly:

    By controlling most of the oil refining in the country, Standard Oil became a monopoly. This means they had almost complete control over refining, allowing them to set prices and make the rules for the industry.
  1. Impact on the Market

  • Controlling Prices:

    Because they controlled so much of the refining business, Standard Oil could decide the prices for oil products. They often lowered prices to drive out competitors and then raised them once they had control.
  • Influencing the Whole Industry:

    Even though Standard Oil focused on refining, its control over this part of the industry gave it power over the entire oil market, from drilling to selling.
  • Antitrust Lawsuits:

    Standard Oil’s power eventually led to complaints and legal action. In 1911, the U.S. Supreme Court decided that Standard Oil was an illegal monopoly and ordered it to be broken up into smaller companies.
  • Legacy:

    Even after being broken up, the companies that came from Standard Oil, like ExxonMobil and Chevron, remained important players in the oil industry.

Conclusion

Standard Oil became a horizontally integrated monopoly by taking control of the oil refining business. By buying out competitors and using aggressive tactics, Standard Oil dominated refining, allowing it to control prices and become one of the most powerful companies in history.

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