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Competition in the U.S. Energy Industry







Chicago area. Our data is revealing in this respect. The top two recipients of crude oil from the Gulf Coast are Texas and Louisiana; however, the third and fifth largest recipients are Illinois and Indiana, respectively, while New Jersey and Pennsylvania are seventh and ninth. The largest recipient of foreign crude oil is California while the second through fourth largest are Pennsylvania, New Jersey, and New York. Thus, refineries in the midwest are heavily "dependent" on domestic crude while coastal refineries obtain roughly half their receipts of crude oil from foreign sources. These considerations, together with the fact that a market based on Gulf Coast production is geographically distinct only under the weak form of our test, impels us to conclude that the market for crude oil is international.

Examination of data on coal shipments revealed a tendency for the scope of geographic markets to increase. This trend toward increased geographic scope is "artificial" to the extent it has been induced by antipollution requirements. Nonetheless, such requirements have induced or augmented changes in transportation capabilities which will remain even if air pollution standards are relaxed. Finally, the market for coal is regional only under the weak form of our tests. For these reasons we offer the tentative conclusion that the industries comprising the energy (input) sector—uranium, gas, oil, and coal—are (at least) national in scope.

Footnotes

Footnote :

a States listed in order of importance (i.e., shipments received). This listing pertains only to the weak form of our tests.

Footnote :

b Data for these states combined in Bureau of Mines reports on bituminous coal and lignite.

NOTES (Numbers in brackets refer to references, p. 217.)

Footnote :

1. Actually, this is a definition of an efficient market. Thus, the prices paid for 3-year-old Fords may vary substantially both within and among cities, depending on information costs, etc. For our purposes, however, the more restrictive definition is appropriate.

Footnote :

2. An exception is the uranium market, which is simply presumed to be at least national in scope.

Footnote :

3. Much of this material is taken from Gerard Debreu [5, Chapter 2].

Footnote :

4. In other cases, e.g., new automobiles, the distinction between utility characteristics and physical attributes is less clear. See, for example, Thomas Hogarty [9].

Footnote :

5. A detailed discussion of this approach is contained in Kelvin Lancaster's article [12].

Footnote :

6. We shall ignore other, perhaps simpler, configurations since they are relatively uncommon. Among these situations are the central market case and the situation where buyers are concentrated and sellers dispersed. For a discussion of all these cases, see Harry W. Richardson [17, Chapter 2].

Footnote :

7. See Frank A. Fetter [8]. Subsequent developments are contained in C.D. and W.P. Hyson [11].

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8. See R.D. Dean, W.H. Leahy, and D.L. McKee [4, p. 194].

Footnote :

9. For the distinction between competitive and efficient markets, see the discussion in note 1.