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Oil Executives Grilled About Mergers, High Prices

Posted on: Friday, 17 March 2006, 03:04 CST

By H. Josef Hebert< Associated Press

WASHINGTON - Lawmakers told oil executives Tuesday that a "merger mania" in their industry has significantly diminished competition and allowed soaring oil and gasoline prices.

"These price increases cannot be explained solely by increased cost of oil," said Sen. Dianne Feinstein, D-Calif., as chief executives of the country's six largest oil and refining companies waited to testify at a Senate hearing.

The executives, in testimony before the Judiciary Committee hearing, defended the industry's consolidation arguing that large companies are needed to compete in oil exploration and in the global oil markets.

"We need U.S. energy companies that have the scale and financial strength to make investments, undertake the risk and develop the new technologies," argued Rex Tillerson, chairman of Exxon Mobil Corp., the world's largest publicly trade oil company, which reported $36 billion in profit last year.

John Hofmeister, president of Shell Oil Co., said that despite the size of the major oil giants "this remains a highly competitive industry." He said Shell's gasoline brand has only a 12 percent market share nationwide and that 90 percent of its stations are owned by independent retailers.

But Republican and Democratic senators questioned industry concentration, especially in refining and retail.

"It is naive to think that massive consolidation has had no impact" on prices, said Sen. Charles Schumer, D-N.Y., who suggested "we should seriously explore divestiture, particularly on the downstream refining and retail" areas.

In 2004, the five largest refiners controlled 56 percent of the gasoline refined in the United States and the 10 top companies controlled 85 percent, according to a study by Public Citizen, a private advocacy group.

Judiciary Committee Chairman Arlen Specter, R-Pa., said he hopes to consider antitrust legislation on oil company mergers.

That would make it illegal for companies to hold back refining crude oil - or diverting or exporting refined products such as gasoline - when supplies are short in a region in order to hold up prices.

Source: Augusta Chronicle, The

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