There is no gas crisis, except for consumers.
Top Five Oil Companies Control Most of Domestic Oil Market, Consumers Suffer.
WASHINGTON, D.C. -- Oil companies are collecting record profits while consumers get drilled at the gas pumps, underscoring the iron grip the companies have over virtually every aspect of the oil market.
In the first three months of this year, profits for the five largest oil companies operating in the U.S. rose nearly 40 percent over the same period last year, data show. The companies are involved in all facets of the industry, from exploration, production and refining to distribution and retail sales.
In the wake of recent oil company mergers, the five companies -- Exxon-Mobil, Chevron-Texaco, BP Amoco-Arco, Phillips-Tosco and Marathon -- control more than two-fifths of domestic production, nearly half of the domestic refining and more than three-fifths of the domestic retail market. These top five oil companies are so big that they produce more oil than Saudi Arabia, Kuwait, and Yemen.
Consumers are getting hosed when they go to the gas pumps this summer because a handful of corporations control our oil and gas market," Public Citizen President Joan Claybrook said. "There is no petroleum crisis, so opening up wilderness areas to oil drilling, as the Bush-Cheney energy plan envisions, will do nothing to help consumers. What we are seeing is the predictable result of a monopoly market. It allows the oil companies to artificially control prices.
When companies get this large, they have little incentive to engage in price wars to compete for business, Claybrook said. Instead, the Big Five simply add to their record profits by taking advantage of consumers who are forced to pay high prices.
Solutions include a windfall profits tax, which would dissuade companies from price gouging; stronger federal anti-trust laws to ensure consumers have access to competitive markets; routine investigations of market manipulation; a requirement that oil companies maintain minimum reserves to protect consumers from price volatility; and a federal oil reserve to counteract marketplace price gouging. But a key remedy must also be conservation, particularly improved fuel economy standards for sport utility vehicles, light trucks and cars. Increasing average fuel economy to 35 miles per gallon would save 1.5 million barrels of oil per day by 2010 -- more than double what could be extracted from the Arctic National Wildlife Refuge if drilling were allowed there. By 2020, a 35-mpg standard would save 4.5 mb/day -- almost as much as the 5 mb/day the U.S. imports from OPEC countries.
Companies are further solidifying control of the market, and people are suffering from it, said Wenonah Hauter, director of Public Citizen's Critical Mass Energy and Environment Program. "The government needs to step in and protect people from getting gouged every time they gas up their cars.
Since the announcement or enactment of the four largest domestic oil mergers in 1999 and 2000, after-tax profits for the top five companies have risen 146 percent, from $16 billion in 1999 to nearly $40 billion in 2000, according to the Public Citizen report.
When people gas up this summer, they should know that the high prices they are being charged are not because of a shortage," Claybrook said. Instead, the mergers in the domestic oil industry and the backsliding on conservation are the reasons consumers are being deprived of fair prices.