In addition, the GAO found that the merger of Phillips Petroleum with Conoco, which primarily involved the acquisition of oil exploration and production assets, was associated with an estimated average decrease in wholesale gasoline prices across cities affected by the merger of nearly two cents per gallon.
The office examined the effects of mergers and market concentration using an economic model that ruled out the effects of many other factors. The GAO consulted with a number of experts and used both public and private data in developing the model. It tested the model under a variety of assumptions to address some of its limitations. It also interviewed petroleum market participants.
This analysis provides an indicator of the impact that petroleum industry mergers can have on wholesale gasoline prices, it said. Additional analysis would be needed to explain the price effects that the GAO estimated.
The office used two separate measures of market concentration, one which measured the number of sellers at wholesale gasoline terminals and another which measured the market share of refiners supplying gasoline to those sellers, and found that less concentrated markets were statistically significantly associated with lower gasoline prices. For example, for wholesale terminals with more sellersi.e., terminals that were less concentratedthe GAO estimated that prices were about eight cents per gallon lower at terminals with 14 sellers than at terminals that had only nine sellers. This result is consistent with the idea that markets with more sellers are likely to be more competitive, resulting in lower prices.
Using the second measure of concentration, the GAO similarly found a statistically significant association between prices and the level of refinery concentration, with less-concentrated groups of refineries associated with lower prices.This study reinforces the need to review past petroleum industry mergers, and the GAO said it has recommended and continues to recommend that the Federal Trade Commission (FTC), the agency with the authority to maintain petroleum industry competition, conduct such reviews more regularly and develop risk-based guidelines to determine when to conduct them. The FTC reviewed a draft of this report and supports the GAO's recommendation to conduct more reviews of past petroleum industry mergers.
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Andclick here to view a chart on the affect of specific mergers on gasoline prices.
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