Consumer Group Says Corporate Mergers Are Partly to Blame for Price-Gouging of Consumers at the Pump
WASHINGTON, D.C. – High gasoline prices cannot be blamed entirely on natural disasters, but rather on unchecked corporate behavior, Public Citizen will tell a Senate committee today. At a hearing before the Senate Committee on Commerce, Science and Transportation, Tyson Slocum, research director, Public Citizen’s energy program, said that recent oil company mergers are partly responsible for gasoline price spikes. He listed steps the government should take to alleviate high gasoline prices. To read Slocum’s testimony, click here.
The government should restore competitive markets by enforcing antitrust laws that make it illegal for companies to intentionally withhold an energy commodity from the market for the sole purpose of creating a shortage and driving up prices, Slocum said. The government also should re-regulate energy trading exchanges, boost fuel economy standards and force the divestiture of assets to remedy the problem of too few companies controlling too much of the market.
Despite Hurricane Katrina’s reported impact on gasoline prices, gasoline and oil prices have been creeping up for two years, in large part because of a wave of mergers in the oil industry. Last year, the top five U.S. oil refining companies controlled 56.3 percent of domestic oil refinery capacity. A decade ago, the 10 largest U.S. oil refining companies controlled 55.6 percent of refining capacity — which means that, due to mergers, the five largest oil refiners today control more capacity than the 10 largest did a decade ago. This consolidation makes it easier for oil companies to gouge consumers at the pumps. The five largest oil refiners — ConocoPhillips, Valero, ExxonMobil, Shell and BP — have seen profits of $228 billion since President Bush took office in 2001.
Despite government reports issued in 2001 and 2004 that directly link corporate mergers to high gasoline prices, no action has been taken to aid consumers who are suffering from a volatile market where prices spike day by day. Meanwhile, oil industry profits are at record highs, largely due to record refinery profit margins. While in 1999, U.S. oil refiners earned 22.8 cents for every gallon of gasoline they refined, that profit margin increased 80 percent by 2004, to 40.8 cents per gallon.
“We have every meteorologist in the country monitoring hurricanes, letting us know exactly when the next one is going to hit and where. But who is monitoring the companies that are jacking up gasoline prices for consumers under the guise of natural disasters?” Slocum said. “We need the government to protect us from dangerous weather, but we also need to be protected from price-gouging every day when we heat our homes, drive our cars or fly somewhere.”