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The Waters-Pierce Oil Company was an American firm with an important mission in Mexico: the development of the domestic oil market. Because of its peculiar niche in the United States petroleum industry, Waters-Pierce came into monopoly control of Mexican petroleum sales during the Porfiriato. Waters-Pierce neither produced nor

refined oil products within the United States; it only sold them. A combination of Waters-Pierce's marketing specialization and its connection to the powerful Standard Oil group worked to develop the necessary sales infrastructure and to widen the growth-induced market for petroleum products. But growth of Mexico's consumption of petroleum products, while enlarging Waters-Pierce's profits, at the same time invited competition. (Profits beget competition, as the old capitalist adage goes.) Once it had developed the market in Mexico, by 1900, Waters-Pierce became vulnerable to competition from producers. Only other foreign businessmen — not Mexicans — had the technical and financial resources to break the marketing monopoly that Waters-Pierce enjoyed in Mexico.

It was not as if no one had known that Mexico possessed petroleum resources. In the Huasteca and Tabasco, pre-Columbian Indians had located a number of pools that oozed sulfurous gases and thick pitch, from which they extracted the substance they used for patching canoes, earthen jars, and baskets. Pitch was also used to cover idols and stucco, to stoke cooking and bonfires, and as a curative salve. In the 1540s Bernardino Sahagún noted that Indian merchants were bringing chapuputli from the Gulf Coast to marketplaces in the highlands. "This chapuputli is odorous," the Franciscan friar reported, "and when it is thrown into the fire, its smell spreads far." Indian women chewed the tar in order to clean the teeth.^[4] During three centuries of colonial rule and an additional half-century of troubled independence, both the markets and production of oil in Mexico remained about as limited as these pre-Columbian origins.

Nevertheless, the possibilities of Edwin Drake's 1859 experiment at drilling for crude oil, resulting in history's first oil boom, were not lost upon the Mexicans. The emperor Maximilian gave out a total of thirty-eight oil concessions to Mexicans and Frenchmen in 1865. But nothing happened. After Maximilian fell from power, Ildefonso López had requested the permission of the governor of Tamaulipas to exploit the asphalt bubbling in pools on his Hacienda de San José de las Rusias west of Tampico. He needed a concession from the political authorities, because they had inherited the ownership of subsoil resources — hydrocarbons as well as gold and silver — from the Spanish Crown. What became of López's project is not known. At San Fernando, Tabasco, a priest named Manuel Gil y Sánchez scooped petroleum from what he called a "mine." Apparently thinking of developing an export market, he sent ten barrels of oil to New York. But the Pennsylvania oil

boom begun by Drake's discovery had depressed the price of crude to such a degree that no one there was motivated to buy imported oil. Subsequently, Dr. Silmon Sarlat Nava, the governor of Tabasco, bought the San Fernando property. Changes in the mining laws in the meanwhile had reversed the colonial legal traditions and permitted private ownership of oil. In 1894, Sarlat registered his property with the government, also describing it as a "mine." "In a well of three-meters depth, which I ordered to be dug," Sarlat reported, "the petroleum emerges in a fluid and green state, as that of Pennsylvania in the United States."^[5] Considering the enormous obstacles to developing these "excavations," the lack of transportation, the isolation and climate of Tabasco, the lack of either domestic or foreign markets, and the limited production of a three-meter well, it is not surprising that none of these native entrepreneurs brought in an oil field.

The Mexicans were not alone in these early production failures. Several foreigners also failed to initiate the Mexican oil boom during the latter quarter of the nineteenth century. In 1876, a Boston naval captain dug some shallow wells at the Hacienda Cerro Viejo near Tuxpan. The climate, vegetation, poor infrastructure, and lack of capital depressed the seaman, and he committed suicide. Cecil Rhodes, of South Africa fame, then joined in a British consortium, the London Oil Trust, that took over the Cerro Viejo property of the deceased. The Britons attempted to bring inland the most up-to-date drilling equipment. The multiple infrastructural problems were daunting, and Rhodes and his associates, none of whom were experienced oilmen, also gave up.^[6] In the meanwhile, exploration was also proceeding farther south near Papantla. A Confederate sympathizer of Irish ancestry, one Dr. Adolfo Autrey, in 1869 took over a prospective oil property and distillery close by the ruins of the sixth-century Totonac city of El Tajín. The oil was described as being "as dense a liquid as cooked linseed oil."^[7] Autrey displayed the kerosene produced from his small still at the Exposition of Querétaro in August 1882. By then, he had acquired four haciendas near Tuxpan. Containing large lakes of floating oil, the Hacienda Juan Felipe was described as the "fountainhead" of the petroleum supply in the region. A French engineer visited the oil properties near Tuxpan. He was struck by the incessant bubbling of "hydrogen and naphtha" from these oil springs.^[8] Despite the good prospects for production (Juan Felipe later became a booming oil field), ultimately the Boston entrepreneur had to give up the property. His problem was transport. Autrey sent his product out of the rain

forest on mule-back rather than via pipelines. He finally gave up.^[9] Other entrepreneurs with greater financial, technological, and marketing resources would eventually open up production on these very same properties — but twenty years later.

As for pioneer oil sales, a Spanish merchant at Tampico, Angel Sáenz Trápaga, had brought some kerosene and gas oil lamps from New York. He was unable to sustain any kind of volume trade in the new product, for which no market as yet had been developed. Later as a broker, Sáenz aided the American marketer Waters-Pierce. The firm had broken off negotiations with the governor of San Luis Potosí, who had requested a personal fee of 100,000 pesos from the company for a permit to build a refinery there. Sáenz helped Waters-Pierce establish the refinery to process imported crude oil at Tampico.^[10] This practical Mexican entrepreneur understood that if he himself could not sell oil products directly, he might as well make what profit he could by assisting the Americans.

No doubt, poor waterways, jungle growth, debilitating climate, torrential summer rains, a lack of roads, and a dearth of experienced laborers worked to disable these attempts by Mexicans and foreigners to open up the Mexican petroleum industry. In truth, there was an even greater obstacle. The capital necessary to put in pipelines, hire drilling teams, purchase equipment and barges, and establish refineries was large. To do these things in a rain forest cost significantly more. But no financier, national or foreign, would be willing to place such large amounts of capital into these oil projects until there existed a market for Mexican petroleum products. The logical place to develop a new market was in Mexico itself, since the United States in the late nineteenth century was awash with petroleum. Only foreigners who had prior experience in the oil business were prepared to undertake such an endeavor. For that, Mexico had to await events elsewhere.

Col. Edwin Drake's discovery in 1859 that oil could be drilled for like water revolutionized the industry. Previously, there existed a very small niche in the illuminant markets for oils distilled laboriously from coal and for kerosene distilled from crude oil skimmed — also laboriously — from pools and creeks. No wonder candles and whale oil remained the primary illuminants of the mid-nineteenth century despite the primitive manufacturing methods in candle making and the declining population of leviathans. Technology and capital had played a role in Drake's breakthrough. He had needed capital for equipment and experienced drillers. Some financiers from New Haven, Connecticut, be-

came interested. With new capital, Drake hired a team of experienced water and salt drillers, adopting the existing technology to search for crude petroleum. The Drake well was hardly a gusher. It was only sixty-nine feet deep and flowed at a rate of 25 bd (barrels per day). But it did prove that oil could be produced in commercial quantities by drilling for it.^[11] Before too long, petroleum illuminants replaced candles and whale oils, first in U.S. markets, then in markets elsewhere in the world.

Standard Oil had become the most successful business organization in the world within just one generation of Colonel Drake's first oil well in Pennsylvania. Previously associated with a New York mercantile house, John D. Rockefeller in 1865 became a partner in one of Cleveland's oil refineries. By 1870, he had created the Standard Oil Company (Ohio) in order to combine several specialty oil companies into a multi-million-dollar concern. Standard next worked to secure a monopoly of oil transport to the eastern seaboard via rail and pipeline. In 1882, Rockefeller's associates organized the first vertically integrated company. The Standard Oil Trust created a business structure in which each subsidiary company carried out a different, specialized economic function. A leader in export, Standard's East Coast refineries soon handled about 90 percent of U.S. petroleum exports.^[12] Standard accomplished its expansion into and domination of oil markets in the American Southwest and in Mexico through an affiliate, the Waters-Pierce Oil Company of St. Louis.

Ironically, Henry Clay Pierce had once been a successful competitor of Standard Oil. The year 1867 found the twenty-two-year-old Pierce in St. Louis distributing oil products for one of the first marketers west of the Mississippi River. He became the oilman's son-in-law and eventually bought out the business. In 1873, Pierce formed a partnership with William H. Waters, who helped him keep the growing Rockefeller interests out of the Southwest.^[13] But Pierce needed capital for further expansion and to buy out Waters. His powerful competitors provided it. In 1878, Pierce sold majority interest in his company to Standard in order to get capital for expansion. Together they bought out Waters, Standard taking a 60 percent controlling share of the stock and Pierce the remaining 40 percent.^[14] As president of the company, Henry Clay Pierce then became signatory to the famous Standard Oil Trust agreement in 1882. He helped the trust standardize products regularly adulterated by independent jobbers and speculators. Standard's components, the Standard Oil Company (New Jersey) and

the Standard Oil Company (New York) handled most of the nation's export of petroleum on the East Coast whereas the Standard Oil Company (California) eventually engaged in exporting from the West Coast. By the 1880s, petroleum ranked as the nation's fourth largest export.^[15]

The tie to Standard Oil defined the powers and limits of Waters-Pierce. It only marketed oil products produced and refined by other Standard Oil subsidiaries and affiliates. In turn, Waters-Pierce expanded as Standard's exclusive agent in the states of Texas and Arkansas, Oklahoma and Indian territories, parts of the states of Missouri and Louisiana, and all of the Republic of Mexico. Pierce's company already had sales in these territories, but now its volume sales grew appreciably. Other marketing companies in the Standard group did not operate in Waters-Pierce territory, and it did not operate in theirs. Waters-Pierce did not own a single oil well or refinery in the United States. This relationship to Standard Oil made Waters-Pierce at once a powerful, prosperous, but dependent oil company.

Its experience in Texas bears examination, for Waters-Pierce's vulnerability there presaged its later demise as a monopoly firm in Mexican oil sales. Before the nineteenth century was out, Waters-Pierce had expanded its sales and competed with a tenacity that gained Henry Clay Pierce some enemies among competitors and politicians within his marketing area. In 1889 and 1895, the state of Texas passed antitrust laws requiring licensing of all firms that engaged in interstate business. State statutes outlawed any business combination that fixed prices or restricted competition. At the time, before oil was discovered anywhere in the state, Texas consumers depended upon petroleum goods — mostly kerosene and lubricants — imported in boxes and tins via ship and rail. Pierce controlled 95 percent of this Texas market. His agents charged prices that were 10 to 25 percent higher than those in other marketing areas.^[16] Normally, Waters-Pierce extended sixty-day credit to their jobbers on a long line of axle greases, lubricants, and engine oils. "We hope that you will continue to buy your lubricating oils from us," the company would write to Texas merchants. "[We] are willing to make contracts with you for one year at lower prices than you could purchase the same quality of oils for from any of our competitors."^[17] The Waters-Pierce agents gave rebates of 15 percent to Texas merchants who signed exclusive contracts with the company.

Merchants in various parts of the Pierce marketing area sometimes broke the exclusive agreement and began to sell the illuminating and lubricating oils of competitors. Waters-Pierce responded by dropping

prices in that locale until the jobbers reconsidered. "Stringent methods were usually followed to keep out competition," reported a long-time Waters-Pierce employee, "and wherever a small concern endeavored to invade the territory occupied by the Pierce interests prices were lowered until the smaller concern was driven out of business."^[18] To create the appearance — if not the substance — of competition, Pierce bought out firms like the Eagle Company and the Texas Oil and Gasoline Company of San Antonio and kept them in operation as "apparent" competitors. The state's attorney general remained skeptical. In a popular and widely publicized trial, Waters-Pierce was convicted of acting as a "trust" to fix or manipulate prices and restrain competition. Waters-Pierce in 1898 lost its license to operate in Texas.^[19] The Texas case represents the continuing efforts of government bodies in the United States to regulate the volatile competition in the petroleum industry and to prevent the consumers from getting fleeced.

Henry Clay Pierce, however, soon recovered his lucrative market by colluding with Standard Oil to reorganize Waters-Pierce. As he later told a Missouri court, he wanted it to appear that he was managing and controlling the company "absolutely free from the dictation and direction of the Standard Oil Company."^[20] In 1900, he took back all Waters-Pierce stock from Standard Oil but secretly returned two-thirds of the shares. The stock strategy — and a timely loan to a Texas congressman — enabled Pierce to apply for a new Texas license. Waters-Pierce thought it was back in business as before.

In any case, the second license had not returned Waters-Pierce to its monopoly position in Texas for long. Discovery of the Spindletop oil field in 1901, ushered in with Anthony J. Lucas's 100,000-bd gusher, abruptly transformed the state's petroleum market. Large new consortiums that combined production, refining, and sales, like the Gulf Company and The Texas Company, came to dwarf Waters-Pierce. The latter, after all, had remained a marketing concern. Just a few acres at Spindletop in 1902 now produced about 20 percent of the nation's petroleum.

Several of the new Texas refineries would have exported to Mexico, if Waters-Pierce had not already had a refinery in place at Tampico. When these first Texas wells began to flow to salt water in 1903, the wildcatters opened up new booms elsewhere in Texas and, by 1907, in Louisiana and Oklahoma as well. By 1902, Texas produced more than 18.5 million barrels of oil, second only to the new boom state of Ohio. As other companies — such as Joseph Cullinan's The Texas Company — expanded refining capacities along the Gulf Coast from 700 bd in 1902 to 200,000 bd in 1905, Waters-Pierce was left out.^[21] In the fullness of

time anyway, the company's reorganization had come to seem the fiction it actually was. The state of Texas filed another lawsuit in 1907, resulting in a second revocation of Pierce's license. The continuation of Waters-Pierce's exclusive relationship with Standard Oil had violated the 1903 Texas statute against unfair competition. The Texas courts found that even after the breakup of the Standard Oil Trust in 1892, the Standard Oil Company "controlled, managed and directed" Waters-Pierce.^[22] Its connection to Standard Oil that had once made the sales company such a powerful business entity in the American Southwest now, after 1901, relegated Pierce's firm to second-class citizenship within the booming industry. Waters-Pierce would be condemned to repeat the same cycle of power and vulnerability in Mexico.