Senators, mad about gasoline prices, mull ban on oil mergers

Washington (Platts)--1Feb2006

Concerned that oil industry consolidation has led to gasoline market
abuse, US senators on the Judiciary Committee said Wednesday they are
interested in reforming the nation's antitrust laws, boosting criminal
penalties for price gouging, and curtailing or temporarily banning mergers.

     The panel's chairman, Senator Arlen Specter (Republican-Pennsylvania),
said he would even consider supporting the breakup of oil companies to improve
competition if there was evidence of market manipulation.

     His statement came after a committee hearing on whether there is a
relationship between oil industry mergers since the early 1990s and high
gasoline prices.

     Senators expressed doubt there is collusion among industry players, but
several said mergers have brought higher prices at the pump.

     Federal Trade Commission member William Kovacic defended the agency's
oversight of the industry, and said that while mergers have led to more
concentration of market power in refining, for example, competition has not
been hurt.

     "Despite increases in concentration at some production levels over the
last two decades, most sectors of the petroleum industry generally remain
unconcentrated or moderately concentrated," he said. "In addition, the growth
of independent marketers and hypermarkets has increased competition at the
wholesale and retail levels in many areas."

     However, under questioning Kovacic said Congress should consider in some
way whether to limit mergers, which are taxing FTC resources.

     Connecticut Attorney General Richard Blumenthal offered recommendations
that appeared to have support. Specter liked Blumenthal's proposal to ban
mergers that models expect to lead to a "highly concentrated" market. And
Senator Diane Feinstein (Democrat-California) backed his idea to prohibit the
industry from using zone pricing at the retail level.

     Blumenthal also called for a joint federal-state probe of alleged abuses,
similar to the government's probe of Microsoft Corp a few years ago. He
maintained that simply launching such an investigation would drive down
prices.

     FTC is investigating on Congress's behalf whether there was industry
collusion or price gouging after Hurricane Katrina last Sepgember. It expects
to issue a final report in May.

     Specter said he would hold additional hearings on the topic, including
one with the oil majors, who declined an invitation to testify Wednesday.

     In addition to Specter and Feinstein, Sens. Mike DeWine
(Republican-Ohio), Russ Feingold (Democrat-Wisconsin), Herb Kohl
(Democrat-Wisconsin) and Charles Schumer (Democrat-New York) appeared
supportive of reining in oil company market power through legislation.

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