Gasoline Price Changes - Federal Trade Commission

THE DYNAMIC OF SUPPLY, DEMAND, AND COMPETITION
19. See TANCRED LIDDERDALE, ENERGY INFO. ADMIN. (EIA), U.S. DEP’T OF ENERGY, MOTOR GASOLINE OUTLOOK
AND STATE MTBE BANS, at http://www.eia.doe.gov/emeu/steo/pub/special/mtbeban.html (last modified Apr. 6,
2003).
20. MIDWEST INVESTIGATION, supra note 1, § II.B.
21. See U.S. Gasoline Gets Messy, INT’L OIL DAILY, Oct. 23, 2003. Ethanol requirements aggravate the supply and
storage problem. Verleger 8/2 at 43; Morgan 5/8 at 124. See also McKeeman 8/2 at 172 (major storage problem in
California is ethanol). Ethanol is not moved by pipeline because it is a solvent and thus adversely affects product
integrity in batch operations. Accordingly, ethanol is delivered by truck to terminal locations. Cooper 8/2 at 3.
Once at the terminal, ethanol must be stored in separate tanks before it is mixed with gasoline. McKeeman 8/2 at
172.
22. Carol Cole, Europe’s Refiners May Be Ready but Not Willing to Ship Ethanol RBOB, 8 GLOBAL REF. & FUELS
REP., Mar. 17, 2004.
23. Kim Benestante et al., US Spot, Futures Unleaded Prices Hit New Highs; Tight Blending Components, Refinery
Snags Keep Bulls in Control, PLATTS OILGRAM PRICE REP., May 4, 2004.
24. Gary Raynaldo, First Venezuelan RBOB Imports Arrive on Spec, PLATTS OILGRAM PRICE REP., June 17, 2004.
25. On June 15, 2005, the Office of the Attorney General of Florida released a report on gasoline pricing in Florida.
See OFFICE OF THE ATTORNEY GENERAL OF FLORIDA, REPORT ON GASOLINE PRICING IN FLORIDA (2005). The
Florida report found no evidence of state or federal antitrust violations, but included low inventory levels as a factor
that contributed to high prices. This Report agrees with the Florida report that lower inventory holdings may make
an area more susceptible to short-term price spikes when there is a disruption in supply. This Report, however, also
notes a long-term benefit from lowering inventory costs – that is, lower average prices for a gallon of gasoline.
26. MIDWEST INVESTIGATION, supra note 1, § II.A.
27. MIDWEST INVESTIGATION, supra note 1, Executive Summary.
28. D.J. PETERSON & SERGI MAHNOVSKI, NEW FORCES AT WORK IN REFINING 43 (Rand, Science and Technology
Doc. No. MR-1707-NETL, 2003).
29. The Report on Gasoline Pricing in Florida, supra note 25, also included recent oil company mergers as a factor
purportedly contributing to high prices in Florida. The Florida report stated these mergers created an
“interdependent marketplace” which may have allowed refiners to charge higher prices for gasoline. The Florida
report did not, however, identify an empirical basis for finding coordination or collusion among the oil companies.
The Florida report posited that the “relatively small number of refineries are expected to recognize that their
behavior is interdependent, and that actions taken by one firm will significantly impact others and likely market
prices.” Id. at 69. As we note in the FTC’s Petroleum Merger Report, the FTC has required significant divestitures
in many petroleum industry mergers to prevent increased concentration in properly defined relevant antitrust
markets. The Herfindahl-Hirschman Index (HHI) (see supra Box 2-2) for wholesale gasoline suppliers (which
includes imports as well as domestically produced product) in Florida in early 2004 was only 1,019. The HHI has
been at roughly the same level for the last five years, ranging from 994 to 1,125. BUREAU OF ECON., FED. TRADE
COMM’N (FTC), THE PETROLEUM INDUSTRY: MERGERS, STRUCTURAL CHANGE, AND ANTITRUST ENFORCEMENT,
243-44 tbl.9-6 (2004) [hereinafter PETROLEUM MERGER REPORT], available at
http://www.ftc.gov/os/2004/08/040813mergersinpetrolberpt.pdf. While the state of Florida likely does not represent
a relevant geographic market for antitrust purposes, this HHI level indicates that the Florida “wholesale market” is
CHAPTER 4: THE REGIONAL LEVEL 99