Connecticut Attorney General's Office
Attorney General, At U.S. Senate Hearing, Testifies That Consolidated Gasoline Industry Endangering Market
February 1, 2006
Attorney General Richard Blumenthal today testified before the U.S. Senate Committee on the Judiciary in Washington, D.C., urging Congress to launch a six-tiered attack on dangerously spiraling gasoline prices.
Blumenthal said the lax federal enforcement of anti-trust laws has led to dangerous monopolistic power concentration in a few companies. He recommended several steps, including an aggressive joint federal-state investigation and a one-year moratorium on oil industry mergers, to prevent further consolidation in the gasoline industry that has caused increased gasoline prices.
The attorney general was asked to testify because his office is helping to lead the Executive Committee of a multi-state investigation of oil prices, prompted by the alarming and appalling abuses that emerged in the industry in the wake of Hurricane Katrina.
Blumenthal reiterated his support for a windfall profits tax, saying, "The gargantuan record-breaking $36 billion profit reported by Exxon Mobil for 2005 should be a rallying point for a windfall profits tax on major oil companies - but also for intensive investigation of the abusive practices and monopolistic power that enable these outrageous revenues. This company's profits - rising 40 percent over last year - shows the immediate urgent need to curb monopoly power. A windfall profits tax is necessary, but not sufficient.
"The mega-companies that arose from this merger mania have aggressively used their ever-growing clout to leave consumers at the mercy of increasing prices and unnerving market volatility," Blumenthal testified. "Big Oil has created a market on the brink, manipulating inventories and refinery capacity to the point that the slightest supply disruption sends prices - and company profits - skyrocketing.
"While consumers struggle with record high prices for heating oil and gasoline, the industry is awash in cash. Government tolerance of anti-competitive mergers and oil industry practices has enabled - even encouraged - the recent sharp rise in gasoline prices. Congress must take swift, aggressive action easing sky-high gasoline prices that hit hardest people of low and moderate means, who can only reduce by so much their consumption of such a vital commodity."
Blumenthal urged Congress to:
- Order an aggressive, comprehensive federal investigation, in partnership with the states to determine whether and how oil companies have misused monopolistic power - much as federal and state antitrust enforcers combined and cooperated in a similar investigation regarding Microsoft;
- Enact a one-year moratorium on oil industry mergers;
- Prohibit any oil company merger in a highly concentrated market unless the Federal Trade Commission (FTC) specifically finds consumers benefit from the merger;
- Ban zone pricing and other mechanisms that prevent gasoline retailers from obtaining gasoline at the best price;
- Expand refinery capacity and mandate minimum levels of inventory of a significant source of energy; and
- Lessen our dependency on gasoline through conservation efforts and alternative fuels.