WASHINGTON -- Two government economists disagreed Wednesday over whether oil company mergers in the late 1990s played a part in today's record gasoline prices, said the Associated Press.
Thomas McCool, an economist at the Government Accountability Office (GAO), testified before a congressional committee that a GAO study of eight of the largest mergers found that they raised oil prices by one to seven cents a gallon. But Michael A. Salinger, director of the Federal Trade Commission (FTC) Bureau of Economics, said, "We do not believe consolidation in this [image-nocss] industry has been a major factor in higher prices."
Instead, Salinger blamed today's high prices on increased demand, refinery snags and a recent drop in gasoline imports. Average U.S. pump prices reached a record $3.22 per gallon Wednesday, according to AAA and the Oil Price Information Service.
Lawmakers from the House and Senate's Joint Economic Committee were inclined to point the finger at the industry's merger wave, such as Exxon's purchase of Mobil in 1999, Chevron's acquisition of Texaco in 2001, and Conoco's merger with Phillips in 2002.
"I don't understand how an industry that makes tens of billions of dollars per year can still have rusty refining plants that constantly break down," said Senator Chuck Schumer (D-N.Y.), chairman of the committee.
Representative Carolyn Maloney (D-N.Y.) noted that gasoline prices have hit record highs just as the summer driving season begins. "Is it coincidence or corruption?" she asked.
The petroleum industry defended mergers as a benefit to consumers.
Wednesday's hearing was the latest in a series as Congressional Democrats have stepped up their scrutiny of the oil and gas industry. The House Judiciary Committee's antitrust task force and a House Energy & Commerce panel have both held hearings on the subject in the past week.
In addition, the House on Tuesday passed legislation that would allow the Justice Department to sue the Organization of Petroleum Exporting Countries (OPEC) for violating antitrust laws with its production quotas.
"Industry mergers are not a cause of higher gasoline prices," Red Cavaney, chief executive of the American Petroleum Institute (API), testified. "In fact, mergers contribute to production efficiencies that benefit consumers."
The FTC's Salinger echoed Cavaney's assertion regarding efficiencies. He told the committee that lower gasoline prices earlier this decade resulted in part from the efficiencies brought about by industry mergers. "I don't think people realize how fortunate we were to have prices as low as they were for as long as they were," he said.
Click here for statement of Congressman Jim Saxton (R-N.J.), Joint Economic Committee ranking Republican, on oil and gas prices.
Click here for FTC statement.
Click here for testimony of FTC's Salinger.
Click here for testimony of GAO's McCool.
Click here for statement of API's Cavaney.
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