Oil Industry Mergers, Low Fuel Economy Standards Contribute to High Gas Prices, Public Citizen Tells Congressional Lawmakers

 

May 28, 2004

Oil Industry Mergers, Low Fuel Economy Standards Contribute to High Gas Prices, Public Citizen Tells Congressional Lawmakers

Energy Expert Testifies at Hearing on Gas Prices in Nevada, Arizona and California

HENDERSON, Nev. – Mergers in the oil industry during the past decade have resulted in an uncompetitive domestic oil market that keeps gas prices artificially high for consumers while the top oil companies rake in record-setting profits, Public Citizen told lawmakers at a congressional field hearing on high gas prices in Arizona, California and Nevada. 

The consumer group advocated the restoration of competitive markets to bring down gas prices and called on the U.S. government to fix the price crisis through increased oversight and regulation, as well as stronger fuel economy standards to reduce America’s dependence on oil.

Gas prices in the Western United States are more than 10 percent higher than the national average.  California has the highest gas prices in the nation.

Testifying before the House Government Reform Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs, Tyson Slocum, research director for the energy program at Public Citizen, argued that the top five oil companies have a stranglehold on the market, enabling them to manipulate prices by intentionally withholding supplies. 

“Consumers are paying more in the West than elsewhere because oil companies are exploiting the inelastic supply created by reformulated gasoline to engage in anti-competitive behavior,” Slocum said.  “We must begin by doing all we can to hold oil companies accountable and stop them from engaging in anti-competitive behavior.”

The five largest oil companies operating in the United States are ExxonMobil, ChevronTexaco, ConocoPhillips, BP-Amoco-Arco and Royal Dutch Shell.  They control 14 percent of global oil production, 48 percent of domestic oil production, 50 percent of domestic refinery capacity, and nearly 62 percent of the retail gasoline market. These same companies also control 21 percent of domestic natural gas production. Slocum recommended restoring competitive markets to bring down gas prices. 

“Congress can remedy this price-gouging by taking two broad actions,” Slocum said.   “First, it should limit the financial incentives oil companies have to keep gasoline supplies artificially tight. Lawmakers can do this by mandating minimum storage of gasoline, re-evaluating recent mergers, investigating anti-competitive practices and re-regulating oil trading. Second, lawmakers should temporarily cease filling the Strategic Petroleum Reserve because this would help increase domestic oil supplies.”

Boosting fuel economy also is key, Slocum said.

In April, the U.S. Environmental Protection Agency found that the average fuel economy of 2004 vehicles is 20.8 miles per gallon (mpg), compared to 22.1 mpg in 1987 – a six percent decline. This decline is attributable to the fact that fuel economy standards haven’t been meaningfully increased since the 1980s. Also, sales of fuel-inefficient SUVs and pickups have exploded: In 1987, 28 percent of new vehicles sold were light trucks, compared to 48 percent in 2004.

Billions of gallons of oil could be saved if significant fuel economy increases were mandated, Slocum said. Improving fuel economy standards from 27.5 mpg to 40 mpg for passenger vehicles and from 20.7 mpg to 27.5 mpg for light trucks (including SUVs and vans) by 2015 would reduce U.S. gasoline consumption by one-third.

To view Public Citizen’s March report about rising gas prices, click here. To view Slocum’s testimony, click here.

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