FTC enforcement, probes have prevented higher oil prices: report

New York (Platts)--13Aug2004

Mergers of private oil companies over roughly the past decade have not
resulted in any significant concentration of crude production and reserves
worldwide, the US Federal Trade Commission said Friday. The FTC, in
wide-ranging report on the affects of mergers and other oil industry trends,
also determined that its enforcement work and investigations in recent years
have thwarted anti-competitive behavior among companies, and, as a result,
saved consumers from higher gasoline prices. "Thorough FTC merger
investigations and enforcement have helped prevent further increases in
petroleum industry concentration and avoid potentially anticompetitive
problems and higher prices for consumers," the report, created by the agency's
Bureau of Economics, said. 

The report found that large oil companies are acquiring and divesting assets
at "roughly the same rate." It noted divestitures exceeded acquisitions by
more than $30-bil in the last half of the 1990s, while acquisitions beat sales
by about $52-bil early this decade.

"...The net result was that large oil companies did not grow much larger in
the past decade through acquisitions," the FTC said. The agency's report would
appear to be a counterpoint to a recent US General Accounting Office report
that found recent mergers have contributed to higher energy prices. The FTC
noted that since 1981, it has found that 15 large mergers it reviewed would
have resulted in a significant reduction in competition and harm to consumers.
In 11 cases, the companies involved agreed to "significant divestitures,"
while in the other four, the parties involved abandoned the deals. 

The FTC also said Gulf Coast refineries continue to produce most of the US'
refined products, with "substantial" volumes shipped to the Midwest and East
Coast. Additionally, shipments from the Gulf to the Rocky Mountains have begun
to increase, a trend "likely to continue," said the report. The FTC also found
that the share of worldwide crude production accounted for by US-based
companies declined to 8.4% in 2002 from 11.4% in 1990.

This story was first published in Platts real-time news and market reporting
service Platts Global Alert
(http://www.platts.com/Oil/Real-Time%20Information/Global%20Alert/ ).

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