Specter On The March
Bloomberg has this in-depth article about Sen. Arlen Specter’s efforts to modify the antitrust laws in reaction to the recent profits of oil companies.
Republican Senator Arlen Specter, who summoned top executives in the oil industry to a Senate hearing today, is seeking stronger antitrust enforcement to lower oil, gasoline and natural-gas prices. Legislation drafted by Specter, chairman of the Senate judiciary committee, would make it illegal to withhold fuel to boost prices and would put new limits on mergers that might hurt competition. Executives including Exxon Mobil Corp. Chairman Rex Tillerson will tell the committee that industry takeovers save money and reduce prices, according to their prepared testimony.
The article further states:
The provision in the draft legislation that would make it illegal to withhold supplies would mark a change in antitrust policy, according to Diana Moss, vice president of the American Antitrust Institute. It would require a policy determination that oil products be treated differently than other products because they are vital to America’s consumers and the economy, she said.
Regardless of whether or not you believe oil products are vital to America’s consumers and the economy, I have grave doubts about the wisdom of treating different products/markets differently under the antitrust laws because of a belief (rightly or wrongly) that the product is “vital” to American consumers and the economy.
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March 15th, 2006 at 5:44 pm
Given the merger that have gone through recently, it seems we need a tightening of the standards for all industries. But it is better to end the lax standards for one industry than for none.
March 16th, 2006 at 2:17 pm
As the world marketplace becomes more efficient, many industries require that companies scale up to effect economies of size and to assure their competitive edge. The fact that only one US oil company is in the top ten in the world suggests there is plenty of competition in the oil patch. Sen. Spector is hunting in the wrong patch.
March 16th, 2006 at 5:15 pm
Would the right “patch” be? OPEC? See, for example, Tim Noah’s (of Slate.com) series of articles about antitrust lawsuits against OPEC here (http://www.slate.com/id/1008106/), here (http://www.slate.com/id/2061770/) and here (http://www.slate.com/id/2081361/).
Or is there even a right place for Sen. Spector to hunt?
March 19th, 2006 at 4:31 pm
There really is nothing wrong with a large corporation, especially when the competition is just as large if not even larger than them. When it comes to oil, the companies need to be large in order to maximize efficiency. Just imagine if there were 10,000 mom and pop oil companies out there. Each with one of their own oil rigs, one oil tanker, and one refinery. Just imagine how inefficient that company would be.
There is plenty of competition on the oil market right now. I do not think that tightening the restrictions on oil companies would be beneficial to the American oil market in the long term.
March 19th, 2006 at 8:31 pm
Another benefit of the oil mergers of the 1990s was that it enabled them to become bigger investors on the international market. As it was pointed out above, only one U.S. company ranks among the top ten companies worldwide. Additionally, seven of them are state-owned, which makes the challenge of competing with them all the more formidable. Sen. Specter and his fellow Senators should be looking for ways to help strengthen American oil companies, not hurt them.
March 21st, 2006 at 9:07 am
I’m amazed that an American company can compete on a global level at all when the competition is primarily (foreign) government-owned national oil companies. Couple that with enormous costs–burdensome taxes, the cost of crude oil, R&D–and IMHO, there is no want for competition in the “oil patch.” That’s not a hospitable economic landscape on a good day.
March 21st, 2006 at 6:16 pm
[…] Between my beloved NCAA basketball tournament and very nasty cold/fever combo, I’ve been m.i.a. the last few days. In the interim, there have been a number of comments in response to our post about Arlen Spector and his proposal to create a separate set of antitrust laws for oil companies. […]
March 21st, 2006 at 6:47 pm
A recent article in Forbes said it was ‘hard to see how Specter’s legislation will help lower gas prices.’ This legislation, as noted at the top, is clearly in reaction to high oil company profits, yet it will do nothing to address that problem. What, then, is the point?
March 21st, 2006 at 6:51 pm
Sorry, here is the link to the story in Forbes I referenced:
http://www.forbes.com/business/energy/2006/03/15/exxon-shell-senate-cxjh0315energy.html
March 24th, 2006 at 12:22 pm
[…] Last week, I reported on Sen. Specter’s proposal and wrote that “I have grave doubts about the wisdom of treating different products/markets differently under the antitrust laws because of a belief (rightly or wrongly) that the product is ‘vital’ to American consumers and the economy.” Glad to see that great minds think alike. […]
March 30th, 2006 at 7:50 am
And wouldn’t retroactively taxing an industry based on success strike fear into the hearts of other industries and discourage them from acheiving similar success?
June 16th, 2006 at 3:30 pm
[…] As I am on record opposing amendment of the antitrust laws to create special standards for different industries, you can probably guess my opinion on The Oil Industry Merger Antitrust Enforcement Act which would, among other things, amend the Clayton Act so that “the burden of proof shall be on the defendant or defendants to establish by a preponderance of the evidence that the merger, acquisition, or transaction at issue will not substantially lessen competition or tend to create a monopoly” (in the case involving the “business of exploring for, producing, refining, or otherwise processing, storing, marketing, selling, or otherwise making available petroleum, oil, or natural gas, or products derived from petroleum, oil, or natural gas”). […]