Washington (Platts)--23May2007

Reconsideration of oil company mergers in the last two decades "may be in
order," Senator Charles Schumer, Democrat-New York, said at a joint
Senate-House hearing Wednesday.

     "On the surface, it seems that Big Oil is pumping cash rather than
petrol, strengthening profits rather than fixing rusty pipes, and they're
using their dominant market positions to buy back their own stock rather than
meet the growing demand for fuel in this country," Schumer said at a hearing
of the Joint Economic committee, which he co-chairs. "If there was more
competition in this market, wouldn't these companies be investing in new
production rather than sending their oligopolistic profits back to
shareholders?  When markets have been distorted from lack of competition in
the past, the federal government has taken action."

     Michael Salinger, director of the Federal Trade Commission's Bureau of
Economics, said at the hearing that since 1982, the agency has filed
complaints against 21 proposed oil industry mergers and ordered 17
"significant divestitures. Four other [proposed mergers] were abandoned."

     Salinger said tight market factors have contributed to higher prices, and
he does not believe consolidation in the oil industry has been a major factor.
The agency has seen "no evidence that refinery capacity is below competitive
levels," he said. Nor are oil company profits "confounding," Salinger said. If
they failed to make such profits given current prices, "I would question their
competence."

     Salinger also said "people don't realize how fortunate they were to have
prices as low as they were for as long as they were." Prices are also lower
than they would otherwise be as a result of the efficiencies gained from
industry consolidation, he said.

     Diana Moss, vice president of the American Antitrust Institute, an
advocacy group whose goal is to promote competition, testified that research
"appears at least to support the notion that merger activity in the US since
the mid-1990s involving refiner-marketer combinations has increased wholesale
and, sometimes, retail prices." However, such studies have been controversial
inside the economic community, Moss said.

		--Gerald Karey, gerry_karey@platts.com