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Some Oil Brokers Who Formerly Drank Champagne
From the New York Times of October 11, 1885
“Yes,” said a Beaver-street oil dealer as he tilted back in his office chair, “the good old days of oil speculation are over; the days when the market would jump 20 and 30 cents a barrel either way in as many minutes. I fear, are past and gone never to return,” and the petroleum diplomat laid a leg over a corner of his desk and sighed.
“But what can I do for you?” he said. “Do you want to buy some oil? Good time now to catch on before the advance.”
The reporter murmured: “Not today – some other day.”
“You want to sell, eh? Just the time now to go a few thousand short before the break comes.”
The reporter buttoned up his pockets and said:
“What’s the matter? I saw an oil broker drinking beer at a free lunch counter today.”
“Yes, that is getting to be quite a common occurrence. It is as I told you – the good old days are over. There was a time when a man could make $1,000 before lunch.”
“And lose it after?” hazarded the reporter.
“Certainly, and more with it. Probably the most interesting period in the history of the petroleum business from a purely speculative point of view,” continued the dealer in answer to a question,” was during the Fall of 1876 and through the year 1877. At that time a sale of 100,000 barrels in a single block was unheard of. Twenty thousand was accounted a large transaction and exerted a palpable influence on the market. During the Summer of 1876 the price of oil ranged from $2 to $3 a barrel. The production was gradually falling off, while both in this country and Europe the demand was steadily on the increase. It was beginning to be a question how this discrepancy was to be remedied, particularly as many believed that the area of oil-producing territory was defined and rapidly being exhausted. Prices naturally held very firm under such conditions, and the man who talked five-dollar oil was listened to with respect. Meantime the Standard Oil Company, which controlled the entire refining interests, held their commodity at 15 cents per gallon.
“This was the situation on the 26th day of August, 1876, when the news was flashed from New York to Oil City that refined oil had been advanced to 26 cents. It was like exploding a bombshell on the Exchange. Every man around the bull ring felt that the expected rise was at hand and crude he must have and as much as he could get. Amid the wildest excitement the market climbed up that day from 320 to 372.5 a barrel, a rise of $525 per 1,000. That sort of doubling up counts. It doesn’t take long to get rich when the ball is going at that pace. It was on that day that Dan Goettel, “Jimmy” Lowe, M. K. Bettis, and many other young operators and brokers laid the foundations of large fortunes. Goettel became a bigger man than old Rockerfeller, of Cleveland, sometimes called ‘John the Baptist,’ and it was said of him that he could make money faster than Johnny Steele could spend it. He has got his money yet. Many of the others haven’t.”
“Have you got yours yet?” asked the reporter confidentially.
“There is a good story extant of ‘Jimmy’ Lowe, by the way,” replied the oil man, with a smile. “He was one of the most popular men in the oil country. He was a shrewd, bold operator and plucky enough among his fellows, but he was an arrant coward concerning two things – burglars and lightning.
“He was constantly in fear of an encounter with the former, and, like the woman who looked under the bed for years expecting to find a man, at last his fears were justified by the occurrence. Jimmy and a friend, both of them expert telegraph operators, roomed together over a bank, and one night a slight noise aroused Jimmy, who opened his eyes to see a man rifling his trousers near the window. The dreadful moment had come. It was a burglar. Jimmy was in a cold sweat. He lay perfectly quiet, but his agony was terrible. His greatest fear was that his companion would awaken, and then he knew there would be a row. How could he warn him? An inspiration came to him.
“Cautiously beneath the bed clothes he searched and found his roommate’s leg. On it he gave a quick telegraphic call, coupled with the command, ‘Don’t move.’ His friend awakened instantly, and Jimmy, at his novel instrument, telegraphed him that there was a burglar in the room and cautioned him to keep quiet. As his friend was just as much afraid of a burglar as Jimmy was, he gladly accepted the situation, and the silence was only broken by the thief getting in his work. He finally left about $300 richer, an the two operators breathed easier.
“Well, as I was saying, the bull fever set in,” went on the dealer, “outside capital sought investment in oil, and orders to buy came from all parts of the country. In December of the same year the market touched $4.23 with the fever unabated. Men hardly dared name the figure they expected to see it selling at. Oil City was a seething place those days. The town was fitly named. It was bubbling and boiling over with oil. Everybody hung upon the market. The merchants forsook their stores, the doctors and lawyers their professions, the mechanics their trades to loiter about the Exchange. Every night at the Collins House the leading hotel, groups of wildly excited men could be found discussing the coming day’s market, pale and nervous and consumed with eager anxiety to begin again the exciting session. Many found relief from the high-pressure suspense at the poker table; after gambling all day in oil many a man would sit the night through handling poker chips. Oil City got a tremendous ‘boost.’ Eastern men came there, made fortunes, and remained to spend their money. Handsome residences were built, streets were paved and extended, the sewerage was improved, struggling churches were set on their feet, free school edifices built; the city, in fact, which had been only mildly prosperous became thriving and important.
“It was wonderful the money made in that old room in those days,” continued the dealer musingly: “for all this happened before the handsome new Exchange was built. Lots of telegraph operators, poor devils skinning along on $75 a month, said good-bye to ‘lightning-slinging’ that Winter and started in at the bullring with good round bank accounts to stand upon.
“You see these operators had especial advantages. At that time the Exchange was situated in the large ground office of the Collins House, and in the same room at either side were the respective offices of the Western Union and old Atlantic and Pacific Telegraph Companies. A short counter railed off each office with the instruments on the further side. Their steady click, click was half drowned by the tumult around the ring which occupied the centre of the room, but it was easy enough for an expert lolling over the counter to read off the messages as they came over the wires, and as a large order to by or sell always had an influence on the market it was greatly to his advantage to get it before it could be written out and delivered on the floor. To illustrate: One of these operators, whom I will call Johnny, because that isn’t his name, heard an order to Dan Goettel clicking at a machine. It was to buy 30,000 barrels, a big order then. Johnny touched a broker.
“Buy me a thousand quick.’ He said.
“Thirty seconds later the broker had booked a purchase of 11,000 barrels of oil. Then he hurried back to the operator.
“I got it, Johnny,’ he said: ‘one for you and ten for me. What’s the news?’
“Big order to buy,’ explained Johnny, and by this time Goettel was yelling for his oil. With this impetus as a start the market rapidly advanced, and Johnny sold out a few days later at a profit of 80 cents. He made $800, and the broker who had so quickly caught on realized $8,000 by the transaction. That is but one of scores of similar cases.”
“Weren’t cipher messages used?” asked the reporter.
“To some extent, but not as generally as the are now. Nowadays cipher systems on the Exchange are as thick as leaves at Vallambrosa, and some of them are as complex as a woman’s smile.”
“What finally broke prices?” inquired the reporter, alarmed to hear an oil man indulging in flowery periods.
“Bullion,” replied the broker laconically. “Yes,” he continued after a brief pause, “all the time this mad speculation was rife, and men’s heads were filled with the notion that the supply was becoming exhausted, and prices loomed up in the future about as big as a man chose to imagine – all this time, 20 miles below Oil City, in the depths of a Pennsylvania forest, the drill was steadily penetrating into the bowels of the earth. One day a certain drill got there, and in a few hours the oil world knew that the ‘Big Indian’ well was in and flowing 3,000 barrels a day. That was a regular knock-out for the trade. The market couldn’t hold up under such a blow, and many similar ones followed; all the firm feeling went by the board with a whiz; there wasn’t a bull to bellow even faintly, and prices went down like the mercury in December almost without reaction. By the middle of June following that memorable Winter oil was selling at $1.64, and some of us were feeling that the cold weather had just set in.
“Some European dealers got a good thing out of Bullion. It happened that most of the big Bullion wells would come in late in the day after the close of the market. The news was valueless to affect transactions till the next morning. But Europe is five hours ahead of our time. Consequently while the Oil City brokers were reading the morning paper at breakfast the trade in Europe had begun the day’s business. A few firms over there had agents in Oil City who cabled the wells as soon as they came in, while the majority of foreign dealers would not get the news till the opening of the American Exchanges gave them the first quotations. This gain of time and intelligence was, of course, vastly important, and several times – notably in the case of two or three Londoners – resulted in enormous profit.
“But you will have to excuse me now,” concluded the Beaver-street man, “as it is about my time for luncheon. Business is business, you know.”
“Certainly,” asserted the reporter: “but one more question. What are some of the qualifications necessary to become a successful oil broker?”
“There are only two.”
“Only two?”
“Yes; a good balance at the bank and a voice like a fog horn.”
