The NewStandard ceased publishing on April 27, 2007.

Oil Company Trusts May be a Done Deal

by Brendan Coyne

Feb. 8, 2006 – With oil companies reporting record profits and consumers facing higher retail prices on petroleum products and dependent consumer goods, a small but steady push for greater oversight is giving way to a more serious charge: anti-trust law violations.

In recent statements and at congressional hearings, lawmakers, consumer groups and businesses have sounded the alarm over the near-total control a handful of companies hold over the nation’s energy supply.

In testimony before the Supreme Court at the beginning of the year, a group of gas station owners said that Shell Oil and Texaco were fixing oil prices, the Houston Chronicle reported. Their claims were followed less than a month later by charges from a prominent consumers’ organization that continued consolidation within the industry and collusion among the few remaining big companies is creating a situation remarkably similar to that at the turn of the last century, when monopolies and trusts ruled the marketplace.

In testimony before the Senate Judiciary Committee earlier this month, Tim Hamilton, a consultant with the public-interest advocate Foundation for Taxpayer and Consumer Rights (FTCR), called for updated antitrust laws. "Today, the industry acts in unison to limit supply as a means to drive up price" through mutually-owned storage tanks, supply lines and information sharing, he said.

Hamilton detailed a complex mechanism that oil companies allegedly use to actively control prices. The problems originate with the shared tanks, which allow all companies to know how much any competitor has in reserve, leading to price spike across the board whenever a company -- or cooperating companies -- draws down reserves and forces a change at the gas pump, Hamilton said.

"As the companies monitor each price increase from competitors on their computer screens, consumers see pump prices skyrocket across the region and complain bitterly of price fixing," Hamilton told the committee. "Elected officials turn to the Federal Trade Commission (FTC) asking for investigations. The FTC typically issues a study report stating no illegal behavior was found and the oil companies kick out press releases proclaiming how ‘we didn’t do anything wrong’."

FTCR is seeking new legislation to plug the antitrust loophole Hamilton described. Following the hearings, Senator Arlen Specter (R-Pennsylvania) quickly picked up on the theme, stating that: "It is time Congress took a very serious look at modifying the antitrust laws."

Last week, oil companies boasted unprecedented profits for the fourth quarter of 2005, with ExxonMobil leading the way with $10.7 billion, as The NewStandard reported previously. Competitors experienced similar windfalls, though none came close to Exxon’s takings, which totaled $36.1 billion for the year.

The reports followed a record-shattering third quarter that prompted outcry from many groups and led to Senate hearings into price gouging allegations and charges of profiteering. The November hearings failed to produce action.

In separate testimony before the Senate Committee on Commerce, Science, and Transportation last September, the FTC defended its efforts to maintain competition within the oil industry. Commission Counsel for Energy John Seesel cited nineteen separate antitrust complaints and other actions taken against petroleum companies.

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The NewStandard ceased publishing on April 27, 2007.

This News Report originally appeared in the February 8, 2006 edition of The NewStandard.
Brendan Coyne is a contributing journalist.

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