The encyclopedia · Engineering & Operations · Strategic decision · 1878–1883
Independent oilmen built the Tidewater pipeline to break the railroad cartel
In 1879 independent producers pumped oil 109 miles over the Alleghenies in a pipe, ending the railroads' monopoly on moving crude.
Tidewater Pipe Company
the move
In the late 1870s the Pennsylvania oil region's crude had to move by railroad, and the roads' freight rates effectively controlled who could profit from oil. Ida Tarbell's 1904 history records independent producers pushing a 'seaboard pipe-line' to be built and kept independent of Standard Oil capital.
The Tidewater company, formed by Benson, Hopkins and McKelvy, first planned a line to Baltimore, then switched to the booming Bradford field. With Herman Haupt's right-of-way work, they laid a six-inch pipe 109 miles to Williamsport, pumping oil over the Allegheny Mountains for the first time.
Standard Oil fought the line, bought a third of its stock and eventually made peace, but the day of the railroads as the long-distance transporters of oil was over; pipeline hauling soon became the industry's dominant mode.
why it works
- A pipe moved oil without paying per-barrel rail tariffs.
- Independent producers could reach tidewater markets on their own terms.
- The route over the mountains proved pipelines could cross real terrain.
- The threat of bypass forced railroads and Standard Oil to negotiate.
what transfers
When a middleman controls the only route, owning an alternative route — even a costly one — resets the balance of power and can force the incumbent to compete.
what came after
The Tidewater system was absorbed into the pipeline network that Standard Oil consolidated, but it had demonstrated the technology and broke the railroad monopoly on crude. Pipelines became the standard way to move oil overland.
references
- The History of the Standard Oil Company, Vol. 2 — The Fight for the Seaboard Pipe-line
- Energy Economists Rock Oil Tour
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