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A) Oil drilling
B) Oil refining
C) Oil transportation
D) Retail gasoline sales
Correct Answer: B)
Oil refining
Explanation
Oil refining was the core business process that made Standard Oil a horizontally integrated monopoly in the industry. Oil refining is the process of refining or converting crude oil into usable products like kerosene, gasoline, and lubricants. Standard Oil started aggressively acquiring the other oil refining businesses, and by the late 1880s, it controlled about 90% of the nation's refining capacity.
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This is a vertical integration activity—controlling different stages of production. While Standard Oil did have interests in drilling, its dominance started with refining.
Transportation (like pipelines and railcars) was another vertical step. Standard Oil did control parts of this sector, but it was not the core of its monopoly structure.
This became significant much later, especially in the automobile era. During Standard Oil’s rise, kerosene (for lamps) was the dominant product, not gasoline.
In simple terms, horizontal integration means acquiring competitors at the same level of business doing the same type of work. This gives a clear monopoly and with it varied advantages.
Refining had the most consistent profits and was essential to producing marketable oil products like kerosene. Other steps, although crucial, depended mainly on oil refining the most. Hence, Rockefeller chose this to begin his monopoly.
Standard Oil used a variety of methods to eliminate its competitors, with many underhanded techniques too. They would cut the price down, forcing their competitors to go out of business and then buy them. They also used their connections with the railroads, giving them lower transportation costs than their competitors.
Yes! Tech and media companies often buy rivals to gain market share and reduce competition. Even in the varied production companies, horizontal integration is a key way to grow their businesses.
A monopoly exists when one company controls an entire market. Oligopoly, on the other hand, happens where several industry giants control the market together. Standard Oil initially was considered a monopoly; however, after its breakup, it ended up being an oligopoly.
Initially, monopolies like that of Standard Oil weren’t illegal. However, soon their underhanded dealings, pricing schemes, and employee treatment came to the public. The resultant pressure and political action led to the creation of antitrust laws, like the Sherman Antitrust Act (1890), which ultimately led to its breakup.
Its strategies raised concerns about fair competition, worker treatment, and corporate influence on government, all of which are still debated today.
