The Interior Department's decision to grant new offshore oil leases in Alaska to Standard Oil Co. (Ohio) and British Petroleum will reduce competition in the oil industry and lead to higher oil prices on the West Coast, according to a Federal Trade Commission staff study.
The study by the FTC's Bureau of Competition urges the Interior Department to pull back the leases awarded last month, but the FTC's Bureau of Economics disagrees and Chairman James C. Miller III is urging his fellow commissioners to reject the Bureau of Competition's recommendation.
BP owns controlling interest in Sohio and, together, the two companies already own 38 percent of Alaskan North Slope crude oil reserves, the FTC staff study notes. By winning the right to drill on the most promising tracts in the oil-rich waters of Diapir Field, Sohio and BP would gain an even larger share of Alaskan oil and could control the supply and price of oil on the West Coast, the agency's antitrust staff argues.
The two companies, or the joint ventures in which they participate, won 24 of the 121 tracts awarded in the Oct. 13 sale. The oil in these tracts is estimated to be at least one-quarter of the 800 million barrels of oil that are estimated to be commercially recoverable from the Diapir Field. Sohio, BP and their partners bid more than $900 million -- or nearly half of the total $2 billion offered for the 121 tracts.
The Justice Department, which also reviews antitrust implications of oil leases, has already told Interior it does not believe that the award of the leases would create any anticompetitive problems.