Monday, Jul. 23, 1973

Back Come The Trustbusters

Not since the legendary trustbusters cracked John D. Rockefeller's Standard Oil empire in 1911 has the petroleum industry been under so much antimonopolistic fire. Last week the Florida state prosecutor hit the big oil companies with an antitrust suit, while in Los Angeles a federal grand jury opened a massive probe of price fixing and monopolistic marketing. In Washington, the Federal Trade Commission staff turned over to a Senate subcommittee a report charging that gasoline shortages are in part the result of widespread "anticompetitive" practices. In Congress, legislators introduced a number of bills that would break the oil companies up into much smaller parts.

The bust-the-big drive came as the gasoline crisis that fueled it seemed to be abating. For the first time since early June, the American Automobile Association's "fuel gauge" report showed an increase in the number of service stations that were operating normally--that is, keeping regular hours and not rationing gas to their customers. With refineries turning out gasoline at prodigious rates, gas stocks have been level or building up. Most important, demand has been waning, as drivers slow down and trim trips to save fuel. Still, some communities continue to be plagued by gasoline shortages, including Denver, Kansas City, even San Clemente.

The FTC report charges that the oil companies should have been able to predict increased demand and take steps to meet it. Instead, they "have attempted to increase profits by restricting output." Noting the number of major refinery expansions that have just been announced, the report brushes aside industry assertions that environmentalist complaints stalled refinery building. Said the FTC staff: "Now that governmental intervention has become a strong threat, these companies have suddenly overcome their environmental problems."

Although the report does not charge that the oil companies conspired to produce gasoline shortages, it does assert that they have used them to "eliminate competition." Over the years, the report says, tax regulations, depletion allowances and the now suspended oil-import quota system have allowed the 20 biggest firms--those that control most domestic crude production, proved domestic reserves, refining capacity, pipelines and gas stations--to make tremendous profits at the production level, while holding down supplies and locking out independent refiners.

To change these policies, South Dakota Democratic Senator James Abourezk and Wisconsin Democratic Congressman Les Aspin have introduced a bill that would permit a company to operate in only one of the four phases of the industry: production, refining, pipeline transport or marketing. Democratic Senator Thomas J. Mclntyre of New Hampshire has submitted a bill that would force all U.S. oil companies to give up their retail-marketing divisions by year's end. Florida's attorney general, Robert Shevin, has also filed suit seeking to force the 15 major oil firms to divest themselves of their crude-oil-production arms.

Price Fixing. The FTC is expected soon to file an antitrust complaint against the largest oil companies. In addition, TIME has learned that the federal grand jury that was convened in Los Angeles last week has subpoenaed confidential records dating back to 1969 from about 30 oil companies that do business in the Far West. The jury, led by the antitrust division of the Justice Department, will probe alleged collusion by the companies to fix prices, control supplies and squeeze out independent competitors.

The oil companies dismiss the charges as nonsense. "Sure, the FTC report is absolutely correct," said a sarcastic spokesman for Amoco. "All of us majors here forgot our traditional competition, got together and manufactured the postwar baby boom and the environmental push for shifting from coal to heating fuel, delayed the Alaska pipeline and thought up all the other reasons for a gas shortage." The FTC report, says Frank Ikard, head of the industry-controlled American Petroleum Institute, "appears to be a rehash of arguments which have been refuted many times in the past." Perhaps so, but the trustbusting fever will have a beneficial effect: the investigations are likely to determine whether the charges of collusion and contrived shortages are valid--or just a lot of gas.

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