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CA Attorney General Vows Closer Scrutiny of Mega-Mergers

CA Attorney General Vows Closer Scrutiny of Mega-Mergers

The mega-merger candidates in the production industry face an uphill battle in California, according to the state's attorney general, who promised close scrutiny of their transactions last week. With a new study on the causes of a gasoline price spikes this summer in hand, Attorney General Bill Lockyer said there's a distinct lack of oil industry competition in the state.

"We are going to pursue the investigation of the petroleum industry and we are going to carefully scrutinize the pending mergers of Exxon-Mobil and BP-ARCO to see what we can do to restore more healthy competition," Lockyer said. "Our concern is that high gas prices in California are the result of low competition in the market."

The report, which was completed for the attorney general's office by economists Keith Leffler, Ph.D., and Barry Pulliam, concludes that higher prices for gasoline in California compared to other states are largely the result of three things: the concentration and control oil companies have over the production and sale of gasoline; the state's decision to require clean-burning gasoline; and the state's relative isolation from alternative fuel supplies.

Although no charges have been filed against the merger candidates, Lockyer said both legal and legislative changes would be pursued. He plans to convene a workgroup of experts to develop recommendations for reducing California's vulnerability to refinery outages and resulting price spikes, and for changing free market forces to push down price spikes and increase competition.

"In California, just six companies account for more than 90% of California's refining capacity, and these same six companies control more than 90% of the gasoline sold in California," Lockyer said. "The situation is different outside California. In Texas, by contrast, the top six refiners control less than 58% of capacity and under 34% of the gasoline sold. What the report offers is credible data and highlights matters deserving more attention."

The report shows Californians paid an extra $1.3 billion for gasoline from January to August 1999 as retail pump prices climbed to an average $1.317 with the April peak at 43 cents more per gallon than a year earlier. The U.S. average during the first eight months was $1.084, with Georgia offering the lowest price at $0.886 per gallon.

Rocco Canonica

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