Transportation costs in early oil days

Transportation costs were central to profits in the early oil days (1860s). Crude needs to be transported to a refinery and then refined products transported to end-users/ports. Pipelines are a natural solution here, but they were resisted by the teamsters who made profits off of loading on to rails. Teamsters sabotaged pipelines in this early period1. Therefore oil refiners looked to the railroads or water ways. Cleveland had an edge since it was serviced by three main railines: The New York Central, The Erie Railroad, and the Pennsylvania Railroad. Additionally, during the summer months, the Erie canal could float products to NY.

Railroads preferred working with larger oil shippers because larger volumes in one place meant less stopping of the train and lower costs.


References

1.
Chernow, R. Titan: The Life of John D. Rockefeller, Sr. (Vintage, New York, 2004).

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