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Soon, the Monolith | Oil Watchdog

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Soon, the Monolith

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Thu, Jul 5, 2007 at 5:38 pm

    Soon, the Monolith

    07-5-07 by dugan

     

    Someone recently asked me why Shell sold its
    mega-profitable Southern California refinery to the refining company
    Tesoro. Umm, I dunno, was my brilliant reply. Today, there’s a
    blazingly obvious answer, but it’s strictly a rumor.

    A published but unsourced report
    in London says Britain’s BP and the Dutch-based Shell are reviving old
    merger talks. There’s been no more reporting on it, which makes me
    wonder if it’s true. But the consequences are worth thinking about.

    The combined company would, in market capitalization, match Exxon,
    removing any remaining pretense of a competitive market in the
    integrated oil and gas business.

    As for that former Shell refinery in Wilmington, Ca., BP owns an even
    larger Southern California refinery, which it inherited when it bought
    ARCO in 2000. A merged Shell-BP would have been the Genghis Khan of
    gasoline in Southern California, free to loot and plunder. Too much for
    even laissez-faire regulators to swallow.

    Even with the Southern California refinery issue moot, such a merger is still an anti-trust nightmare.

    Somewhere in the begats
    of the oil mergers of 1998 to 2002, regulators should have called a
    halt. But once BP, Amoco and Arco became one, and Exxon married Mobil,
    who was to stop Chevron and Texaco? Or Conoco and Phillips? By the time
    Chevron ate Unocal, the smaller company was just a snack.

    As with every previous merger, the companies and their allies will
    argue about the "efficiency" of a merged company, about "global
    competititiveness." They’ll quote alarming speculation that Shell could
    otherwise be taken over by the Russians. They’ll argue that BP and
    Shell plan to split the new company into separate oil-drilling and
    refining entities, so it’s not really a merger.

    But with gasoline at $3, and recently up to $3.50, we can all see
    what "efficiency" hath wrought. Exxon, Chevron and their brethren spend
    more of their combined $120-billion annual profit on buying back their
    own stock than on exploration and development. Renewable fuels are a
    laughable asterisk on the annual report.

    "Efficiency" means the safety cutbacks that killed 15 workers at
    BP’s Texas City refinery, post-mergers. And remember last year’s Alaska
    pipeline spills and shutdowns. ExxonMobil still hasn’t paid up for the
    Exxon Valdez disaster. Chevron is still stiffing Ecuadoran peasants
    whose water and land Texaco ruined.

    If this rumor turns out to be true, OilWatchdog will have some "take action" plans. 

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