Are Mega Oil Mergers Pumping Up Fuel Prices?
Tuesday, March 14, 2006LINDA O`BRYON: Oil prices rose $1.33 to $63.10 a barrel today as top oil and gas company executives were called before the Senate Judiciary Committee to testify on mergers in their industry. There have been over 2,600 mergers in the oil and gas business since 1991, including the combination of ExxonMobil, BP-Amoco and Chevron with Texaco. As Stephanie Dhue reports, some lawmakers blame consolidation for fueling higher gas prices.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: High prices at the pump have prompted complaints to lawmakers. Today, members of the Senate Judiciary Committee passed those gripes on to oil company executives.
SEN. MIKE DEWINE (R) OHIO: My constituents in Ohio feel there is something wrong when they're paying record prices at the pump, while oil companies are making record profits.
DHUE: Some lawmakers complain the increase of crude prices alone don't completely explain the spike in retail prices. Instead, they blame the last decade of oil mega-mergers.
SEN. CHARLES SCHUMER (D) NEW YORK: There are fewer, more massive players in the markets. Prices have spiked and what has gone up has not come down. Coincidence? I don't think so.
DHUE: Senate Judiciary Chairman Arlen Specter has drafted legislation that would tighten the review standard for oil industry mergers, requiring they be blocked if they lessen competition. The bill would also make it illegal for companies to hold back refining crude oil in order to boost prices. Oil industry executives say it`s supply and demand, not mergers that have led to higher prices.
DAVID O`REILLY: Think of it as a big bathtub where oil goes into it and people buy it out, and with growth in demand in places like China, and by the way, not just China, the United States itself is growing, demand is high and therefore prices are the natural response.
DHUE: And the companies say it takes size and scale to compete with the national oil companies that control most of the world`s proven oil and gas reserves.
REX TILLERSON, CHMN & CEO, EXXONMOBIL: We need energy companies that have the scale and financial strength to make the enormous investments, undertake the risk and develop the new technologies necessary to provide Americans with greater energy access and greater energy security.
DHUE: High oil and gas prices will continue to keep oil companies in the political spotlight. But despite the rhetoric from Congress, analysts don't expect any policy changes as a result. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
