RE: Pitofsky on economies in Tosco merger

[Dan Mogin <dmogin@adnc.com>]

Some synergies--California gasoline prices remain the highest in the country, even though our crude oil prices are among the lowest. The effective cost of crude in this state in about $7 - $8 per barrel or 16 - 19 cpg, the average retail price of gasoline is about $1.20 less tax of 47 cpg that's 73 cpg, meaning an implied dealer wholesale price (DTW) of about 58cpg.  That means that refiners margin to dealer is about 300%.  About 85% of California dealers must buy on this direct delivery basis. Based on LA pipeline prices of 35 cpg (NYH and Houston are at about 28-29cpg), that still a wholesale margin of about 200% compared to historical margin of 150%.  Why?? Efficiency ?? No concentration.  On Pitofsky's watch, since 1997, the FTC has allowed the Tosco-Unocal deal, the Texaco-Shell deal and the Diamond Shamrock-Ultramar deal.  Where are the consumer benefits?  If the Exxon-Mobil deal goes through, California, the third largest gasoline market in the world, with 50-60% of its crude from low cost indigenous sources and the rest from the low cost Alaska North Slope will still have the highest gasoline prices, but it will be controlled by only 5 companies, ARCO (20%), Chevron (20%), Exxon (17%) Tosco (20%), Texaco Shell (20%) --the other refiner-marketer being Diamond Shamrock Ultramar, which if one were to guess, will soon be purchased by ARCO or Shell.  Meanwhile, energy initiatives to lessen dependence on non-renewable source such as the ZEV and LEV are pushed off.  How can this be happening??
-----Original Message-----
From:	James Love [SMTP:love@cptech.org]
Sent:	Thursday, December 03, 1998 10:32 AM
To:	Multiple recipients of list ANTITRUST
Subject:	Pitofsky on economies in Tosco merger

I just ran across this Oct 16 quote from FTC Chair Pitofsky, indicating
the Tosco-Unocal merger approval was due to the FTC's acceptance of the
efficiencies defense.  jamie


http://www.ftc.gov/opa/1998/9810/pitofsky9810.htm

For Release: October 16, 1998

Pitofsky Assesses Impact of Merger Guideline Revisions

Robert Pitofsky, Chairman of the Federal Trade Commission, said today
that 18 months after adoption of new guidelines for treating efficiency
claims in defense of mergers, dire predictions about the effect of the
guideline revisions have proven inaccurate. 

[snip]

The agencies have won major cases in the face of efficiency claims. And
efficiency arguments have been significant and persuasive in the FTC's
decision to allow certain transactioons to proceed. 

  [snip]

In the Tosco-Unocal merger, involving a combination of refineries in
California, the decision not to challenge similarly was influenced by a
conclusion that there were real synergies to the deal. 

  [snip]

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