A Strong Company in a Dynamic Market
Divested from its parent company in 1911, Standard Oil Co. (California) had strong financial discipline, an impressive product line, marketing savvy, a growing refining system, a flexible marine fleet and an extensive pipeline network. One critical challenge remained: finding the energy to meet spiraling demand in a dynamic marketplace.
In this 1915 photo, a horse-drawn wagon loaded up at a Standard Oil Co. (California) station in Sausalito, Calif., for delivery of Red Crown Gasoline and Pearl Oil to customers in the San Francisco Bay area. Throughout the early decades of the 20th century, the company's quality product line successfully served the U.S. West Coast market. (Chevron Photo)
Fortunately, Standard had the right person for the job in Fred Hillman, who became director of the Producing Department in 1911. Within four years, Standard moved from sixth place to first among California's oil producers. And by 1919, Standard's production had grown to more than one-quarter of the state's total.
Casting aside his original misgivings about the value of science in exploration, Hillman soon built a strong staff of geologists under the leadership of Eric Starke. Using a scientific approach became particularly valuable in assessing California's soft subsurface formations.
Hillman's earliest oil and gas exploration successes came at Midway, where the company made seven discoveries in an 18-month period, including the largest, McNee No. 4, which produced a record 30,000 barrels a day in April 1912. That same month, Derby No. 1 blew out with a daily flow of gas estimated at 63 million cubic feet.
On July 24, McNee No. 10 came in at 2,480 feet, flowing at 10,000 barrels a day and prompting Hillman to send his former employer at Ohio Oil a cable that read: "Can you match it, or do I take first place?" Two days later, Hillman's question was answered when the same well broke loose, at least doubling its output.
New Reserves to Meet Growing Demand
After moving into the Los Angeles basin, Fred Hillman led his exploration team in delivering five gushers at the Emery Field in the West Coyote Hills between December 1912 and October 1913.
Standard Oil Co. (California) scored big in December 1913 when it purchased the Murphy Oil Co. holdings in West Coyote and East Whittier. By 1917, Standard had added two other great Southern California discoveries in the Montebello and Baldwin No. 3 fields.
The company's efficiency and ability to find new reserves helped it keep pace with the surging demand for energy products fueled by the dramatic population growth and increased reliance on automobiles throughout Standard's marketing area. In January 1919, the company had the first of several discoveries in Elk Hills in California's San Joaquin Valley.
While Standard was compiling an impressive producing record, it also became a leader in conserving energy resources. The Starke gas trap, an invention devised by Standard engineer C.C. Scharpenberg and geologist Eric Starke, was one of the more ingenious methods for "capturing" gas from a well that then could be used to meet energy needs.
To serve markets in areas such as the Northwest United States, Standard more than doubled its ocean-going capacity between 1912 and 1916 by adding five tankers, the A.F. Lucas, El Segundo, Richmond, J.A. Moffett and D.G. Scofield. By 1926, the fleet grew to 40 vessels, including 22 ocean-going tankers as well as stern-wheelers, launches, barges and tugs.
Standard saturated its marketing territory with sales outlets, tripling the number of small bulk plants by the end of 1916 and quadrupling the number of substations between 1911 and 1919. And, by turning from horse-drawn vehicles to motor transport, the company increased the speed and range of its sales operations.
Coping With Increased Competition
Standard Oil Co. (California) also steadily expanded its service station network. It became the Western leader by the end of 1919 with a total of 218 stations, more than the next three rivals combined. By 1926, the number of service stations in the company's five-state marketing area more than tripled, to 735 units.
Though gasoline sales more than doubled between 1911 and the end of 1914, increased competition caused Standard's market share to fall during that same period. By 1926, the company's gasoline market share in its five-state Western area shrank to 28 percent - down from 55 percent in 1919.
Following upon the success of Red Crown automobile gasoline, Standard introduced Red Crown aviation fuel in 1918, promoting the product through advertisements and through wider commitment to the growth of the aviation industry. In 1924, the company painted town names on the rooftops of its bulk plants to help guide aviators flying overhead.
Standard excelled in developing new products, such as the line of petrochemicals manufactured to support the Allied effort in World War I. This production of benzol, toluol and xylol was a forerunner of the impressive line of petrochemicals that the company developed following the onset of the Second World War.
Standard turned increasingly to international markets to maintain its sales growth. Between 1911 and 1914, export sales rose from 14 to 28 percent of the total business. In addition, the opening of the Panama Canal in August 1914 gave the company greater access to Eastern U.S. and European markets.
A New Name for a Growing Company
As Standard Oil Co. (California) entered the 1920s, the market's insatiable need for petroleum products continued. In 1925 alone, the company's three refineries at Richmond, El Segundo and Bakersfield produced more than 56 million barrels of petroleum products as well as 13.6 million pounds of greases and 340,000 tons of asphalt.
In 1926, Standard boosted its production capacity by almost 50 percent when it acquired Pacific Oil Co., an organization that handled the oil properties of Southern Pacific Railroad. The company marked this achievement by creating a new corporate structure with a new name - Standard Oil Co. of California, or Socal.
One of the hallmarks of the newly named company continued to be the respect and fairness with which it treated its employees. This tradition of enlightened human relations dated back to the company's founders, who espoused favorable wages, hours and working conditions for all company employees.
In 1916, Standard became the first company in the industry to adopt an eight-hour day for all salaried and contract employees. That same year, salaried employees were given two-week vacations. Other benefits, including sick leave and retirement benefits, were added within the next few years.
Honoring the 'Standard Oil Spirit'
The fair treatment of company employees had a direct payoff in morale. In 1919, 94 percent of the employees who had served in World War I returned to work for the company at a time of high employment and opportunities for workers.
Recognizing the cooperation and mutual confidence throughout the company, President Kenneth Kingsbury in 1923 described this all-important attribute as the "Standard Oil Spirit," which "represents, on the part of the personnel, a fine enthusiasm for the company, and a concern for its welfare, of which the company is justly proud."