CLICK TO SUPPORT OUR SPONSORS

Starbulletin.com


Editorials
spacer



[ OUR OPINION ]

Isle oil companies
ignore market forces


THE ISSUE

A congressional report accuses the oil industry of manipulating supplies to create gasoline price surges.


OIL industry executives are defending gasoline price increases on the mainland as being reflective of market conditions, but no such argument can be made in Hawaii. While a U.S. Senate report accuses the industry of manipulating the market by holding back on oil supplies, creating spikes in gasoline price charts, oil companies in Hawaii make no pretense of responding to market forces.

"Price spikes are becoming a way of life ... and not without serious consequences," Sen. Carl Levin, chairman of the Senate Permanent Investigations Subcommittee, told oil executives. However, Levin should begin worrying when the spikes disappear, as they have in Hawaii, where the price of gasoline has coasted along steadily at levels far above mainland rates.

The report by Levin's committee staff accused some refiners of withholding supplies in tight markets to drive up prices, but it found no evidence of collusion. The report also concluded the industry did not act illegally, but Levin suggested that antitrust law should be changed to make it illegal for companies "to have the same price relationship up and down."

According to the report, an e-mail sent within one unidentified oil company in 1997 suggested that it "use Chevron and Aloha as benchmarks" in gas pricing and that it be done "on a site-by-site comparative basis, not on price alone." The nervous recipient of the suggestion warned the colleague against writing down any suggestion of "conscious parallelism," a pattern of following the industry leader in pricing. An investigation, his e-mail added, could "infer the existence of a conspiracy among competitors to fix prices."

Actually, as the report points out, conscious parallelism is perfectly legal, as long as companies act independently. Such uniform pricing occurs most frequently in "oligopolistic industries producing standardized goods," according to Julian O. Von Kalinowki, a prominent California antitrust lawyer.

"Often, the industry leader will set a price which is consciously followed by competitors," Von Kalinowki added in his book on antitrust law. "Absent any additional factors, the resultant price uniformity throughout the industry does not constitute an antitrust offense, even though the effect is the same as if price fixing had been involved."

More troubling in Hawaii than the uniformity of gasoline pricing has been the oligopoly line in the past that high prices were attributed to shipping and refining costs higher than on the mainland. Information gleaned recently from the state's antitrust lawsuit against oil companies revealed that explanation to be false.

The deception, in addition to the absence of competitive pricing, warrants the imposition of gasoline price caps in Hawaii. Oil industry chicanery on the mainland has yet to reach that level, but recent mergers resulting in increased concentration of ownership in the industry indicate it may be headed in that direction.



BACK TO TOP



Published by Oahu Publications Inc., a subsidiary of Black Press.

Don Kendall, Publisher

Frank Bridgewater, Editor 529-4791; fbridgewater@starbulletin.com
Michael Rovner,
Assistant Editor 529-4768; mrovner@starbulletin.com
Lucy Young-Oda, Assistant Editor 529-4762; lyoungoda@starbulletin.com

Mary Poole, Editorial Page Editor, 529-4790; mpoole@starbulletin.com
John Flanagan, Contributing Editor 294-3533; jflanagan@starbulletin.com

The Honolulu Star-Bulletin (USPS 249460) is published daily by
Oahu Publications at 500 Ala Moana Blvd., Suite 7-500, Honolulu, Hawaii 96813.
Periodicals postage paid at Honolulu, Hawaii. Postmaster: Send address changes to
Star-Bulletin, P.O. Box 3080, Honolulu, Hawaii 96802.



E-mail to Editorial Editor


Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]
[Feedback]



© 2002 Honolulu Star-Bulletin
https://archives.starbulletin.com