South Improvement Company formed in Pennsylvania

Background. The South Improvement Company was a short-lived Pennsylvania corporation founded in late 1871. It was created by major railroad and oil interests, widely seen as part of John D. Rockefeller's early efforts to organize and control the oil industry under Standard Oil. The company's purpose was to end a rate war with rail trunk lines by dividing oil traffic more evenly between the Pennsylvania, Erie, and New York Central railroads.

Formation. The South Improvement Company was established in the fall of 1871 by the president of the Pennsylvania Railroad, according to one account. A group representing trunk railroad and oil refinery interests met in New York in late November 1871 to discuss the creation of the company — a discussion of its formation rather than the founding itself. Sources differ on the precise founding date: a legacy record gives 1 November 1871, but the supplied passages state only fall 1871, and no passage supports Titusville as the founding location.

Secret Negotiations. Secret negotiations resulted in specific terms: official rates from Cleveland to New York were set at $2.56 per barrel, but South Improvement would receive a $1.06 rebate. Railroads would also pay South Improvement $1.06 per barrel for oil not produced by South, provide shipping reports, and divide commerce evenly among railroads, with a double share to the Pennsylvania Railroad.

Control and Legacy. Shares were allocated to oil refining cities, with Jabez A. Watson as president receiving 100 shares. Since Watson and Bostwick were secretly allied with Standard Oil, Rockefeller kept control from Pennsylvania refiners and railroad interests. The scheme caused widespread attention to relationships between big railroads and businesses demanding favorable treatment.