Editorial: Oil merger may harm gas prices

Sunday, Jan. 30, 2000 | 10:41 a.m.

It was welcomed last year when the Federal Trade Commission imposed conditions on its approval of the $81 billion merger between Exxon and Mobil. Before giving its blessing to the acquisition, which created the world's largest privately owned oil company, the FTC wisely required the two companies to sell more than 2,400 service stations to ensure that competition wouldn't be harmed.

Now the FTC is turning its sights to the proposed merger between BP Amoco and Arco. Although this $29 billion acquisition isn't as large as that between Exxon and Mobil, federal regulators still are justifiably concerned that this could result in higher gas prices on the West Coast. This also creates a concern for Nevada motorists since gas prices here are closely tied to those in California, whose refineries serve Nevada, too.

Specifically, the FTC's staff is worried that the merged companies would have control of nearly 70 percent of the oil production from Alaska's North Slope. This, in turn, could hurt competition in the West, since this region relies so much on Alaska crude oil. So the FTC's staff is recommending that BP Amoco sell all of Arco's Alaska oil production, according to Bloomberg News. In response, BP Amoco and Arco offered to sell Alaskan oil fields so they would have just 55 percent of the North Slope production.

Late last week the companies made a counter-offer. The commission then postponed its Friday meeting -- at which time it was expected to vote on its staff's recommendation to file a lawsuit to stop the merger -- and decided to consider the companies' latest proposal, possibly as early as this week. Western state motorists already pay dearly at the pump, so it is encouraging that the FTC's staff has been firm in its opposition to this proposed merger. If BP Amoco and Arco concessions aren't adequate, then, the commission should follow its staff's recommendation and fight this merger in the courts.