High gasoline and crude oil prices led Sens. Charles E. Schumer (D-NY), Barbara Boxer (D-CA) and eight other U.S. senators to call on the Federal Trade Commission (FTC) last Monday to block the purchase of Unocal by ChevronTexaco and to review mergers that led to the formation of ExxonMobil and ChevronTexaco.
The senators say the $18 billion purchase of Unocal can only reduce competition, driving energy prices even higher. ChevronTexaco Corp., the second largest U.S.-based oil major, agreed earlier this month to buy ninth-ranked Unocal Corp. in a cash-and-stock transaction worth about $16.4 billion. ChevronTexaco also agreed to assume $1.6 billion in debt.
"The bottom line is, the price of gas is going way up and competition is going way down," Schumer said in a statement. "Without regulating the mergers of these behemoth oil companies, gas prices will continue to skyrocket -- lining the pockets of Big Oil and bilking American consumers."
The letter, signed by nine other senators said, "We are extremely concerned that this merger will only intensify the dangerous level of concentration in the oil industry. This consolidation has already drastically undermined competition, leaving American consumers vulnerable to repeated and sustained spikes in the price of oil."
Crude oil prices dipped below $50/bbl last Monday for only the second time since February but ended the week over $52. Meanwhile, national average retail gasoline prices have increased to $2.25 and analysts predict that prices could increase as the summer driving season rapidly approaches.
Schumer said that if current gasoline prices stay the same for a year, the average New York driver would pay $234 more in gasoline over the next year and the average two-car family would pay a whopping $468 more in 2005. In total, New York drivers will pay $390.9 billion more per year, he said.
He said the FTC should not allow a purchase that will lead to the formation of a company that has more daily crude oil production than every OPEC member with the exceptions of Iran and Saudi Arabia.
ChevronTexaco already is the world's fifth largest oil company. The resulting corporate entity would be the world's fourth-largest publicly traded oil and gas company behind Exxon Mobil, BP and Shell. Following the merger ChevronTexaco would control 13 billion boe of proved reserves, and would increase its production to 3 million b/d.
"The merger of these two companies will only intensify the dangerous level of concentration in the oil industry," said Schumer. "Consolidation has already seriously undermined competition, leaving American consumers vulnerable to repeated and sustained spikes in the price of oil. Because of the industry's vertical integration, the five largest oil companies in the United States control almost as much crude oil production as the Middle Eastern members of OPEC, over half of domestic refiner capacity, and over 60% of the retail gasoline market."
Schumer said that while U.S. families paid exorbitant energy prices last year, the world's top 10 oil companies made more than $100 billion in profit and in some cases posted record-breaking fourth quarter earnings that were more than 200% higher than the previous year. This year, crude oil prices have been consistently trading at above $50/bbl, simultaneously increasing the financial burden of energy costs for working families while at the same time driving up oil company profits, he said.
"Americans are getting scorched by sky-high gas prices and the summer hasn't even arrived yet. The Bush administration must do something now to avert what will be a very hot, very expensive summer for all Americans if they are paying three bucks or more for a gallon of gas," Schumer concluded. He also pressed for President Bush to initiate a swap in the Strategic Petroleum Reserve (SPR) to pressure OPEC to reduce oil prices. He introduced an amendment on Friday to the supplemental spending bill that would encourage that result.
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