Dec. 8, 1998
Statement on Exxon-Mobil Merger
Wenonah Hauter, Director
Public Citizen?s Critical Mass Energy Project
The merger between Exxon and Mobil creates the largest corporation in the world and will lead to non-competitive practices that will harm consumers for decades to come. The trust-busters were right 90 years ago during the Teddy Roosevelt era when they broke up Rockefeller?s Standard Oil monopoly into more than 30 companies. Lack of competition was bad for consumers then and it will be bad for consumers today.
Just because oil prices are at their lowest point since the Great Depression in the 1930s doesn’t mean they will not rise in the future. Today?s prices are the result of a world oil glut exacerbated by the economic woes in Asia, the unusually warm weather in the United States, reduced consumption of heating oil in Europe because of a transition from oil to natural gas for heating, more oil production in places like West Africa, and the partial reentry of Iraq into world oil markets.
Currently, there is competition in refining and marketing, and that is also playing a role in lower prices. For instance, Venezuela’s state oil company is providing Amerada Hess Corp. with cheap gasoline. Hess gas stations provide competition at the retail level. New Jersey, for example, has some of the lowest gas prices in the country.
On the other hand, gas prices in San Diego are more expensive because there is less competition at the retail level. When Sell and Texaco combined their U.S. marketing operations, that had an impact on prices in places like California where some competition was eliminated. Prices are higher in Southern California than in the northeastern United States because there is less competition. Prices are lower in Los Angeles than in San Diego because there is more retail competition.
If the first and second largest oil companies in the United States are allowed to merge, there will be problems for consumers down the road. These companies were once fierce competitors, and this will eliminate significant competition. Also, a merger of this magnitude will lead to other mergers and acquisitions in the industry. We could be left with just a handful of big oil companies, portending less competition at every stage of production.
Much of the oil industry is vertically integrated. That means one company owns and operates facilities in all phases of the production and delivery of a product. As the oil industry continues to consolidate, there will be less competition in extracting and refining oil. There must be at least five competitors to have even minimal competition at all levels of production and also at all geographic locations. There should be 10 competitors, at least, to have vigorous competition.
There are many other issues. The impact on our democracy of creating such a large and powerful company will be negative. The oil industry already has a tremendous influence on public policy. A merger of this magnitude will create a super corporation that will have greater influence on government through the corrupt campaign finance system we now have.
There also could be severe environmental impacts as well. Exxon and Mobil are actively engaged in opposing the Kyoto Protocol. A newly created corporation of this size will use its influence to try to stop any efforts to deal with the critical issue of climate change. The merger will also provide this giant new company with the resources to drill for oil in environmentally sensitive areas. There will be more pressure for drilling in the Arctic and deep in the oceans, rather than a drive to develop less-polluting energy sources and reduce energy consumption.
This merger is good for the CEOs and Wall Street, because executives and some investors will make a fortune in the short term. It is not good for consumers in the long term, for the thousands of workers who will lose their jobs, or for the environment. The oil industry is a profitable business today. It is abhorrent that a few individuals should reap a huge windfall at the expense of consumers.
We call upon the Federal Trade Commission to carefully scrutinize this merger deal and to protect the public interest.