Posted by Jonathan Adler:
"Oil Industry Reality Check":
http://volokh.com/archives/archive_2007_07_15-2007_07_21.shtml#1184698542
Timothy Muris and Richard Parker, officials at the Federal Trade
Commission under the Bush and Clinton Administrations respectively,
have an [1]op-ed in today's Wall $treet Journal urging lawmakers to
recognize the competitive reality of today's oil industry before
adopting additional regulations and controls. Here's a taste:
We've spent years at the Federal Trade Commission enforcing the
antitrust laws in this industry and even more time studying oil
markets. We have come to this conclusion: When legislators don't
completely understand the industry, even their best efforts can
harm consumers.
Consider one driver of harmful regulation, the belief that a
handful of large oil companies control the industry. In fact, the
industry is not highly concentrated. The four largest firms
collectively hold a smaller share than the top four firms in many
other industries, and these firms face a lot of competition. Valero
is the largest U.S. refiner and non-oil companies like Wal-Mart,
Sheetz and WaWa sell a significant portion of retail gasoline. Most
gas stations are owned and operated independently.
The oil industry's long-term earnings are also typically in line
with other industries. Recently, the oil industry has earned
above-average profits -- 9.5 cents for each dollar in sales in
2006, compared to 8.2 cents for manufacturers. But U.S. oil took a
hit in the 1990s as earnings fell well below those of other
industries.
And as economic learning and antitrust enforcement have evolved,
we've seen that big and profitable are not necessarily bad. In
recent decades, the real oil industry has greatly improved its
efficiency through a series of mergers, which have improved
resource management, increased innovation and technology diffusion,
and moved assets to firms with the ability and expertise to expand
capacity. Extensive FTC studies have confirmed that the industry is
highly competitive, that concentration and mergers have not
increased prices, and that market forces -- most notably the price
of crude oil and supply shocks -- cause price increases. . . .
What we need are policies that let the market operate to spur
investment in exploration, capacity expansion, operating
efficiencies and technology advances.
Instead, Congress is proposing to exacerbate America's energy
problems. Some want to make price gouging -- a vague term with no
clear legal meaning -- a crime. Such legislation would discourage
the industry from responding rapidly to product shortages. As bad
as high prices are, no gas at all, or a return to gas lines, is
much worse. Moreover, price gouging laws will harm consumers by
reducing investment in new refineries.
References
1.
http://online.wsj.com/article/SB118463467039168409.html?mod=opinion_main_commentaries
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