Mega Mergers of Oil Giants Hurt Consumers, Competition

September 3, 1999

? Mega Mergers of Oil Giants Hurt Consumers, Competition

Public Citizen Analysis Foresees Higher Gasoline Prices

WASHINGTON, D.C. – Mergers of major oil companies will lead to higher prices for consumers and decreased competition in the marketplace, according to an analysis released today by Public Citizen s Critical Mass Energy Project. The report analyzed profits and market shares of potential partners Exxon and Mobil, and BP Amoco and Atlantic Richfield (ARCO). The proposed mergers require the approval of the U.S. Federal Trade Commission.

If approved, the merger Exxon and Mobil will create a mega-company with the largest market share in the nation, which would be a serious threat to competition. This would be especially true in the eight states where the combined share of gas stations would exceed 20 percent, according to Black Gold Merger Mania: How the Exxon-Mobil and BP Amoco-ARCO Mergers Threaten Consumers. The proposed new company would be the leading retailer of gasoline, thus giving it unprecedented market dominance.

“Consumers will pay for the marriage of the oil giants at the gasoline pump,” said Wenonah Hauter, director of Public Citizen s Critical Mass Energy Project. “Fewer competitors results in higher prices. That means bigger profits for CEOs and stockholders at the expense of consumers.”

The BP Amoco-ARCO merger, if approved, would hurt consumers on the West Coast where Arco is a price leader. The merger will create near monopoly control of the Alaska pipeline (72 percent) and Alaska s oil (74 percent), which is sold to West Coast states, with the potential to add extra costs, the report said.

“The proposed BP Amoco-ARCO merger would set up a virtual monopoly on oil from the largest field in the United States and make it the dominant retailer on the West Coast,” said Athan Manuel, director of U.S. Public Interest Research Group s Arctic Wilderness Campaign. “This merger is anti-competitive, anti-Alaska and anti-consumer.”

While the proposed mergers would give greater political power to the surviving companies, consolidation would make the oil & gas industry itself more influential as power becomes concentrated in the hands of the very few. Already the oil & gas industry wields considerable influence in the halls of Congress. The oil & gas industry spent over $120 million lobbying Congress during 1997 and 1998. Exxon spent $10,834,660 on 97- 98 lobbying expenditures; Mobil spent $11,400,000; BP & Amoco spent $8,686,090; and ARCO spent $8,500,000.

Members of Congress appear more than happy to give these companies something in return for oil company money. For example, federal tax legislation currently pending before Congress includes give-aways to the oil & gas industry that would cost the American taxpayer more than $600 million over the next five years. The tax breaks would skyrocket to more than $2.2 billion through the year 2009.

The Exxon-Mobil and BP Amoco-ARCO mergers likely would send other oil companies scrambling to find partners, further hampering competition.

Oil giants claim that their survival is dependent on merging with other companies. An examination of profits from last year, however, shows that even with record low prices, profits were healthy. Exxon shareholders, for example, enjoyed profits of almost $6.5 billion. Meanwhile, oil company CEOs were paid top salaries. Exxon s Lee Raymond earned $11,907,349 and stock options of almost $20 million. Mobil s Lucio A. Noto earned $5,579,768 with almost $9 million in stock options.

“If the oil companies were struggling to stay in business, we wouldn t see billion-dollar profits,” Hauter said.

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For more information on this and other consumer issues visit
Public Citizen s website at www.citizen.org

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