Are Oil Mergers Driving Up Gas Prices?

Mar. 14 (KGO) -- There's suspicion on Capitol Hill Tuesday that rising gas prices are the result of merger mania and less competition by oil companies.

The heads of the nation's largest oil companies faced off with members of the Senate Judiciary Committee on Tuesday. Among the most vocal? California Senator Dianne Feinstein.

The powerful Senate Judiciary Committee, Senator Dianne Feinstein among them, is convinced high gas prices are the result of oil company mergers. Less competition, less pressure to keep prices down. And the two sides had a showdown with no sign of either side giving an inch.

They sat shoulder to shoulder -- six top oil executives on the defensive.

The senators wanted to know why gas prices go up after every oil company merger.

James Mulva , Conoco-Phillips chief executive: "Obviously in this past year, it has gone up, and that's primarily the result of inflation. It's the result of cost structure. It's also a result of the cost of crude oil."

The Government Accounting Office says there have been 2,600 oil mergers in the past 15 years.

BP joined with Amoco; Exxon with Mobil; and Chevron with Texaco -- all good deals, according to Chevron CEO David O'Reilly.

David O'Reilly, Chevron chief executive: "Mergers in our industry over the past two decades have made U.S. companies more competitive and efficient in the production, refining and marketing of energy supplies."

Senate judiciary committee chairman Arlen Specter says proposed laws could make future oil mergers more difficult.

Lawmakers say the facts prove that mergers have weakened competition.

Sen. Dianne Feinstein, (D) California: "In 1991, the five largest oil companies controlled 27 percent of the nation's gasoline stations. Today, five companies control 61 percent."

Shell Oil's president disagreed, saying his brand has only a 12 percent market share and 90 percent of its stations are independently owned.

The executives argued oil is a global business and it's competing with even larger, government-owned oil companies. So they need to make profits to pay for exploration and to merge with other oil companies with reserves.

Case in point: last year, Chevron was competing with a Chinese oil company to buy Union Oil.

Severin Borenstein, Ph.D., U.C. Energy Institute: "This is one big bathtub of oil, and the United States is a very, very small player in it."

What do oil companies do with their profits?

The American Petroleum Institute says oil companies globally will need to spend $6 trillion in the next quarter-century to meet demand.

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