View all Archives -
Environment and Development »
Competition in the U.S. Energy Industry
has
announced plans to construct a new refinery of 100,000 b/d capacity
and has proposed an arrangement with Iran. In effect a joint
venture is proposed; Iran, in return for providing crude oil, would
receive a share of Ashland's downstream operation. If accomplished,
Iran's self-interest would lie in continuing a supply of crude to
Ashland. The proposal is still being negotiated and given the range
of investment opportunities available to countries such as Iran,
there is no assurance that the deal will materialize.
Events in
the domestic refining market have taken a strange twist. Initially,
import quotas created disincentives for domestic refining
investment, but the substitution of a fee system reversed this
situation and resulted in plans to expand domestic capacity.
Finally, expansion plans appear to be jeopardized, to a substantial
degree, by the volatile crude oil supply situation in the Middle
East.
COAL
The
structure of domestic coal production has, in recent years, been
characterized by rising levels of seller concentration and the
acquisition of several large coal producers by oil and mining
companies. Hence, it is not surprising that critics have expressed
concern as to the effectiveness of present and future levels of
competition in coal production. The following section evaluates the
conduct of the coal industry in terms of pricing patterns, output
policies, and the relationship between price and output policies.
The output policies of acquired coal companies is analyzed and
compared to those companies which were not acquired. Finally, the
evidence offered by critics to support their charge of a conspiracy
among coal producers is critically evaluated.
Output
Behaviorg
The output
record during the period 1966-1972 for major coal producers
involved in merger activity is summarized in Tables 3-10 and 3-11.
As indicated in Table 3-10, by 1968, four coal-oil mergers had
occurred: Consolidation-Continental Oil, Island Creek-Occidental
Petroleum, Old Ben-Standard Oil of Ohio, and Pittsburgh and
Midway-Gulf Oil. In 1968, the four coal-oil companies produced
104.9 million tons of coal and by 1972 production stood at 106.4
million tons. Their share of total coal output declined slightly
from 19.2 percent in 1968 to 17.9 percent in 1972. Their share of
the total output attributable from the fifty largest coal companies
also declined from 28 percent to 26.6 percent.
The output
behavior of individual firms presents a mixed picture
and