Word: socal
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...having bought Gulfs oil, will Socal do less exploring on its own? Since it is spending $13.2 billion on Gulf, critics argue, it is not going to have much left over for drilling. Ed Rothschild, assistant director of the Citizen/Labor Energy Coalition, maintains that the reduced competition resulting from the merger will encourage Socal to explore less and charge more for its oil. Says he: "The losers in this deal are the U.S. economy, competition in the domestic oil and gas industry and the consumer...
...economists and industry experts. They contend that there is no reason why the combination of Gulf and Socal should not continue to do nearly as much exploration as the two were doing separately. In addition, they note that if the stock value of oil companies continues to go up, the resulting higher value for reserves swill encourage more drilling. Even the effect on crude prices will be slight. Economist Alan Greenspan of the Townsend-Greenspan consulting firm observes, "These mergers are, in the world scheme, not terribly relevant. Even if they were, it is a competitive market, and no matter...
Experts also downplay any major consequences of oil mergers on America's dependence on the Organization of Petroleum Exporting Countries. Says Walter Levy, a leading oil consultant: "OPEC in general benefits from larger markets for its oil. To the extent that Socal-Gulf and other mergers tend to erode the impetus for domestic exploration, OPEC will benefit-but only marginally...
...merger of Socal and Gulf is not expected to receive any strong Government opposition on antitrust grounds. Said Energy Secretary Donald Hodel last week: "Politically, it's a tough issue because it is a natural reaction to say, 'My gosh, these giants are merging and there must be something bad about that.' But I don't see that it has any significant effect from an energy standpoint...
Despite the prominence and publicity given to Big Oil, the U.S. petroleum industry as a whole remains remarkably diverse. The four largest refiners (Socal, Exxon, Shell and Standard Oil of Indiana) control only about 29% of the market. By comparison, the four top companies in the typical manufacturing industry control an average of 40%. Says a top Federal Trade Commission official: "We could conceivably stop the merger, but it would take the clearest sort of signal from Congress before it would happen...