Oil Mergers Blamed for High Prices

[Diane Monaco <diane.monaco@xxxxxxxxx>]

Oil Mergers Blamed for High Prices
April 2, 2004 
http://consumeraffairs.com/news04/gas_prices.html

In the past decade, mergers in the oil industry have resulted in an
uncompetitive domestic oil market that keeps gas prices artificially high
for consumers while the top oil companies rake in record-setting profits,
Public Citizen charges in a new report.

"If the same company owns every step of the process, from crude oil
production to the gas station down the street from your house, it has
utter control over the price people pay at the pump," said Public
Citizen President Joan Claybrook. 

"Making it worse is our government's lackadaisical approach to
regulating these oil companies as they collect billions of dollars from
every American who drives a car."

The national public interest organization is calling on the U.S.
government to fix the price crisis through increased oversight and
regulation, as well as stronger fuel economy standards to reduce the
United States' dependence on oil.

The five largest oil companies operating in the United States are
ExxonMobil, ChevronTexaco, ConocoPhillips, BP-Amoco-Arco and Royal Dutch
Shell. They control 14 percent of global oil production, 48 percent of
domestic oil production, 50 percent of domestic refinery capacity, and
nearly 62 percent of the retail gasoline market. 

These same companies also control 21 percent of domestic natural gas
production. Since 2001, these top companies enjoyed cumulative after-tax
profits exceeding $125 billion.

This control enables oil companies to manipulate prices by intentionally
withholding supplies. Indeed, a 2001 Federal Trade Commission
investigation into high gasoline prices concluded that oil firms
intentionally withheld or delayed shipping oil to keep prices up.
However, the government has done nothing to end these uncompetitive
practices.

A decade ago, the top five oil companies controlled only 8 percent of
global oil production, 34 percent of domestic oil production, 34 percent
of domestic refinery capacity, 27 percent of the retail market and just
13 percent of domestic natural gas production.

The lack of investigations into uncompetitive practices by these large
companies may be explained by the more than $67 million the oil industry
has contributed to federal politicians since 1999 - with 79 percent of
those contributions going to Republicans, according to an analysis of
Federal Election Commission data from the Center for Responsive Politics.

Further, the energy legislation first developed in Vice President Dick
Cheney's secret energy task force and then largely written behind the
closed doors of the congressional energy conference committee would do
nothing to lower oil and gas prices. Instead, it contains more subsidies
for oil and gas corporations.

"The stalled energy bill does nothing to address this worsening
crisis," said Wenonah Hauter, director of Public Citizen's Critical
Mass Energy and Environment Program. "In fact, as the legislation is
currently written, these giant oil companies are the greatest
benefactors, and consumers are the victims."

The most effective way to protect consumers is to restore competitive
markets. The Bush administration should take the following actions or
seek congressional authority to do so if necessary, according to the
report, available at
www.citizen.org/documents/oilmergers.pdf.