Imperial Oil

Founding and early years

In April 1880, Jacob Lewis Englehart and 16 prominent oil refiners in London, Ontario, and Petrolia, Ontario, formed Imperial Oil in response to Standard Oil's growing dominance of the oil market. Englehart aimed to emulate John D. Rockefeller and merge the entire Canadian oil industry into one conglomerate. Although the majority of Ontario's top oil producers agreed to join in the enterprise, exceptions included John Henry Fairbank, who was then Canada's largest oil producer, and James Miller Williams, founder of the Canadian Oil Company. Englehart and the refiners established Imperial Oil as a joint-stock company with a capitalized value of $500,000. In addition to Englehart, the original shareholders included Frederick A. Fitzgerald, Isaac and Herman Waterman, William Spencer and his sons William and Charles, Thomas and Edward Hodgins, John Geary, Joseph Fallows, John Minhinnick, William English and John Walker. Together, the shareholders possessed twelve oil refineries and controlled 85% of the refining capacity in Canada. Fitzgerald and Englehart were the two largest stakeholders in the company and were named the president and vice president, respectively. Imperial Oil's charter noted that its goal was to "find, produce, refine and distribute petroleum and its products throughout Canada."

Despite its early successes, Imperial Oil struggled to make a profit and issue dividends in the early 1880s. The discovery of new oil fields in Pennsylvania and New York drove down the price of oil, and the creation of the Standard Oil Trust resulted in an increase of American oil imports into Canada. In a move to boost kerosene prices, Imperial closed down ten of the twelve refineries it had acquired through the merger, leaving only the Silver Star refinery in Petrolia and the Victor works in London. In 1883, the Victor works was struck by lightning and burned to the ground, and under Englehart's direction, the company concentrated its refining efforts at Petrolia.

Herman Frasch and the sulphur dilemma

In 1884, Imperial Oil purchased the exclusive use of Herman Frasch's fractional distillation patent, which was more efficient at separating crude oil into usable products. Imperial initially offered Frasch $10,000 and Imperial Oil stock, but he persuaded the company to offer him a salary that matched Fitzgerald's and a seat on the Board of Directors. Frasch had taken the position primarily to supervise the installation of his refining method at the Silver Star refinery and resigned in February 1885 once the work was complete. Frasch then joined John Minhinnick in forming a separate venture called the Empire Oil Company. The pair purchased an idle refinery in London, and Frasch began experimenting on a way to remove the sulphur content in the oil pumped at Lambton County. The high sulphur content in Canadian oil placed it at a disadvantage compared to the oil mined at Pennsylvania due to its "distinctive odour" when burned. Canadians called the product "skunk oil". Between 1885 and 1887, Frasch discovered that mixing copper oxide with the oil during the distilling process would remove the sulphur content and odour from the refined product.

By this time, Standard Oil had also become interested in the desulphurization process after moving production to oil fields in Ohio that had a similar sulphur content to Lambton County. In 1886, Standard Oil persuaded Frasch to return to the United States and join their company by offering "a salary higher than that of any other scientist in the country" and an exchange of his shares in the Empire Oil Company for an equivalent amount in Standard Oil. After returning to the United States, Frasch perfected his desulphurization strategy, and Standard Oil held a monopoly on the process until 1905.