The major oil companies should be forced to sell their interest in petroleum pipelines, says a staff study released yesterday by the Senate antitrust and monopoly subcommittee leaded by Sen. Edward Kennedy.
The study contends the big oil companies' ownership of pipelines, "allows them to control the distribution and flow - and consequently influences the price - of refined petroleum products."
And, the study adds, "control over pipeline yields the power of life and death over independent producers" of oil, severely limiting competition in the industry.
The big oil companies own the pipes that move 95 percent of the nation's crude oil and 80 percent of all petroleum products, the report pointed out to the committee, which is to begin hearings on the topic next week.
The links between oil producers and pipelines were defended by Clifford Garvin, Jr., chairman of Exxon Corp. in a breakfast interview yesterday.
"Kennedy is dealing with preconceptions of the past," said Garvin. "Pipelines are already highly regulated by the Interstate Commerce Commission," and industry critics "have been attacking this target for 50 years."
The Kennedy committee staff report contends domination of pipelines by oil producers goes back even longer than that, to the Pennsylvania oil fields of 100 years ago when oil companies built pipelines so they would not be dependent on railroads for transportation.
Nowdays, the study said, 48 percent of the nation's crude oil is carried in pipelines controlled by the four biggest oil companies - Exxon, Texaco, Shell and Standard of Indiana. The top 20 oil producers own pipelines that carry 96 percent of the crude oil.
The pipeline-owning oil companies use their facilities to control the oil industry in two days, the study said.
First, by setting high pipeline user rates, the owning oil companies profit at the expense of independent producers, the report said."The nonowner is contributing to the lower cost reaped by the owner and, in effect, contributing to its own competitive disadvantage."
And, second, by denying use of the pipelines to independents, the major oil producers protect themselves from competition, the report said. "Multiple logistical and practical problems, rather than outright denials" the report continued, "have preserved these pipelines for the almost exclusive use of major oil companies. Control over pipelines yields the power of life and death over independent producers."
Contending that ICC regulation of pipelines has failed to promote competition, the Kennedy subcommittee staff concluded "only divestiture can ensure that the present competitive inequities emanating from control of pipelines by major oil companies are prolonged no further."