Oil execs defend mergers, but senators question gas prices

WASHINGTON — Top executives from the country's largest oil companies rejected arguments Tuesday that size has allowed them overwhelming market power to force up gasoline and other fuel prices.

The executives, appearing before the Senate Judiciary Committee, each said that the industry mergers — a dozen over the past decade — have allow U.S. companies to improve efficiency and achieve the size and scale of operation to compete with the world's government-owned energy companies in the search for oil.

"Every time there is a merger the prices have gone up. Is that just coincidence?" asked Vermont Sen. Patrick Leahy, the committee's ranking Democrat.

Rex Tillerson, chairman of Exxon Mobil Corp., the world's largest publicly traded oil company, had anticipated the question in his opening remarks.

"With respect to . . . whether mergers and acquisitions in our industry have contributed to higher prices at the pump, my answer is no," said Tillerson, whose company earned $36 billion last year.

John Hofmeister, president of Shell Oil Co., said that despite the size of the major oil giants "this remains a highly competitive industry." He said, for example, Shell gasoline brand is in only 12 percent of the country's stations.

"We are dwarfed in size" by the world's nationally owned oil companies, said David O'Reilly, chairman of Chevron Corp., who brought to the hearing a chart showing ExxonMobil 14th among global producers in terms of how much oil a company controls.

But senators, both Republicans and Democrats, questioned the concentration of market power, especially in U.S. refining and retail areas.

"It is naive to think that massive consolidation has had no impact" on prices, said Sen. Charles Schumer, D-N.Y., who suggested "we should seriously explore divestiture, particularly on the downstream refining and retail" areas.

In 2004, the five largest refiners controlled 56 percent of the gasoline refined in the United States and the 10 top companies controlled 85 percent, according to a study by Public Citizen, a private advocacy group.

Bill Klesse, chief executive of Valero Energy Corp., which since 1997 has bought 17 refineries, says the consolidation of small refineries under Valero has allow efficiency improvements and allowed facilities to continue operating that otherwise would have closed.

"The industry is more competitive and productive," he insisted.