79-07-B3

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Oil

Transcript A few weeks ago I was flipping the TV dial during the early morning news programs looking for a weather forecast when I came upon a discussion. Discussion! It was an argument. Forgetting the weather, I watched and listened to a top oil company executive and Senator Metzenbaum of Ohio. They were guests on a talk show and the subject under discussion was the President's energy program. The Senator was pounding away on the oil company profits, their increase, the increase they'd have with decontrol of oil prices and the only answer to these "obscene profits" was a "windfall" tax. Oh, yes, he also cited the upsurge of oil company stocks on Wall Street. When the oilman responded with a list of major corporations, all of which had a higher percentage of profits and an even greater increase in the market price of their stocks, Metzenbaum said, "yes, but that's different. The oil industry is a monopoly." The oilman broke out laughing. I didn't get to see the rest of the show; the clock ran out on me; but I think I know why the gentleman from the oil industry was laughing. How do we determine whether an industry is competitive of monopolistic? Well, there is no mystery about that. How concentrated is it? Is there freedom for newcomers to enter the field? And what is the record or history of profits? On that first point -- concentration of the industry, for example, the top four automakers account for 91 percent of that business. The top four aluminum companies make and sell 96 percent of the total output of aluminum. By comparison the top four oil companies share only 33 percent of all the oil products sold in America. As for freedom of entry there has been a 65 percent increase in the number of new oil companies since 1951. Independent oil companies have increased their share of the business about 30 percent over the last 10 years. We are so used to thinking of the entire industry in terms of its most familiar trademarks. It comes as something of a surprise when we take a census of the industry as a whole. There are 8,000 different oil and gas producers, 130 refiners, 16,000 wholesalers and 186,000 service stations -- mostly run by independent businessmen. The third point is determining whether a monopoly situation exists has to do with the history of profits. But it's only about half as profitable as television or the major newspaper publishers and it comes in about the middle range of all American industry. There is an oil monopoly. It is made up of the OPEC nations. We can break that monopoly only by finding and producing more oil in these United States, thereby lessening our dependence on OPEC oil, And if our government will trust in the incentives of the marketplace we'll find and produce that additional oil. Then we'll all be laughing--maybe even Senator Metzenbaum. This is Ronald Reagan. Thanks for listening.		Details Batch Number 79-07-B3 Production Date 05/08/1979 Book/Page RPtV-442 Audio Youtube? No
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