Anti-Competitive Anxiety: Exxon-Mobil Would Dominate D.C. Market

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Antitrust enforcers in Washington need only count the gas stations on their way to work to get uneasy about a merger of Exxon Corp. and Mobil Corp.

Together, Exxon and Fairfax-based Mobil would dominate retail gasoline sales in the District more than in any other U.S. city, according to industry statistics. They would control 35 percent of the D.C. market - the kind of statistic sure to provoke close scrutiny if the two companies combine into the world's second-largest oil company behind Royal Dutch/Shell Group.

"This is going to [set off] a wide-ranging investigation," said Steve Newborn, an antitrust lawyer at the Washington firm Rogers & Wells. "The retail problems are going to be all over [the country]." Exxon and Mobil reportedly were to present details of the proposed merger to their boards of directors today. If they follow through, industry analysts said, the two companies will have to convince regulators in the United States and other countries the deal won't hurt competition.

That task will be even more difficult because of the oil industry's monopolistic past and because a growing number of oil companies - the latest being British Petroleum and Amoco - have already merged pieces of their operations.

"I would hope [regulators] would be extraordinarily skeptical," said James Brock, an economics professor at Miami University of Ohio who has written a book on antitrust law. "We are seeing a terrifically anti-competitive consolidation of the global oil industry."

At issue will be areas in which the two companies overlap. And that covers every stage of the oil business - from the ownership and franchising of gasoline stations to the billion-dollar pipelines and refineries they control.

"It has the effect of consolidating and concentrating the control at every level up and down the [supply] chain," Mr. Brock said. "This is so thoroughly and inexhaustibly anti-competitive that partial divestitures are pointless. I think they're really just a charade."

Oil company executives will almost certainly argue they need to combine forces to survive in an era of depressed oil prices. The price of crude has plummeted by more than a third since last year and sits at a low point of around $11 a barrel.

"If we're going to have oil prices closer to $10 [a barrel] than to $20, nobody's going to be able to get a reasonable return on investment," said Ted Eck, an oil-industry consultant based in Colorado.

Mr. Eck and other industry economists said the mergers will be good for consumers because they will allow the companies to cut billions of dollars a year from the cost of doing business.

Exxon and Mobil together account for only about 4 percent of global oil production, and even after a merger they would face stiff competition from foreign oil producers like Saudi Arabia and Venezuela.

"Twenty years ago or even 10 years ago, you would have said this isn't going anywhere," Mr. Eck said. But "there are lot more competitors in the world today than there were 20 years ago. Having Exxon and Mobil merge, it's still more competitive than the world was a decade ago or two decades ago. …