Originally created 05/05/02

Oil industry traverses the slippery slope of collusion



Sen. Carl Levin, D-Mich., suspects oil companies manipulate gasoline supplies to boost pump prices and, in turn, their profits.

And an entire nation says ... duh?

American consumers have been skeptical of the oil industry long before Sen. Levin's Governmental Affairs investigations subcommittee presented evidence this week that suggests Big Oil has plotted to keep prices high.

All signs point to an oligopoly - where a lack of meaningful competition provides no incentive to keep prices low - but there's never a smoking gun. And if something appears to be a smoking gun, there are enough people out there who say it's not.

That's why I'm willing to step out on a limb here and say consumers should not expect anything meaningful to come from this latest probe.

If Sen. Levin's hearings are anything like previous inquiries, such as the Federal Trade Commission's nonconclusive investigation into oil-industry collusion, the impact will be as transparent as fumes from a tailpipe.

The bulk of the evidence in this latest investigation has so far been internal documents from executives at companies such as BP, Shell and ChevronTexaco that discussed ways to cut supplies. Suggestions included exporting gas to Canada, influencing competitors to curtail production and crowding pipelines with products other than gas.

Other documents appeared to show the companies' taking delight at refinery interruptions and production cuts by OPEC.

Some of the oil execs who testified this week downplayed the importance of the memos as "brainstorming" exercises. Others said the documents were taken out of context and apologized for any "inference" of conspiracy they may have showed. Others simply denied having knowledge of circumstances surrounding the memos.

But all suggested there's no monkey business going on.

"There has not been any conspiracy," David Reeves, president of North American Products at ChevronTexaco, said during the Senate hearings. "(Mergers) have increased competition ... created stronger companies better able to compete."

I don't buy that any more than I believe O.J. Simpson is innocent or that Lee Harvey Oswald acted alone. I'll bet most other people don't either.

But again, don't expect too much out of these hearings. Nothing will change.

Gas prices will go up, the oil companies will make an obscene amount of money, people will complain, the media will jump on the story and politicians will call for hearings.

When it seems things are about to come to a head, gas prices will go down, oil companies will make a slightly less-obscene amount of money, people will find other things to complain about (drivers with cell phones, junk mail, crabgrass, etc.), the media will find something else to jump on (fortunately there's always a sex scandal or people killing each other somewhere) and politicians will get back to the business of raising campaign contributions from the oil industry.

Reach Damon Cline at (706) 823-3486 or dcline@augustachronicle.com.