Energy Resource Markets

• Pages: 129-154

129

CHAPTER IV

ENERGY RESOURCE MARKETS

A. Introduction

Both the consumption and the prices of energy resources have been

steadily increasing over time.1 For example, in 2008, the U.S.

consumption of petroleum products was 19.6 million barrels per day, up

from approximately six million barrels per day in 1950.2 The 2008

average price of $3.32 per gallon of motor gasoline was more than five

times the 1978 price.3 The 2008 U.S. natural gas consumption was 23.2

trillion cubic feet, compared to approximately five trillion cubic feet in

1950.4 The 2008 U.S. coal consumption was nearly 1.2 billion short

tons, up from approximately 0.5 billion short tons in 1950.5

Because energy is critically important to consumers, the Federal

Trade Commission (FTC) has focused considerable enforcement efforts

on the sector, concentrating largely on merger control.6 For example, the

1. For a general d iscussion of antitrust issues in the energy industries, see

ABA SECTION OF ANTITRUST LAW, ENERGY ANTITRUST HANDBOOK (2d

ed. 2009).

2. ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, ANNUAL ENERGY

REVIEW 2008 at xxiv, Fig. 18 (June 2009), a vailable a t

http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf [hereinafter 2008 ANNUAL

ENERGY REVIEW].

3. Id. at xxiv, Fig. 21 (explaining that, adjusted for inflatio n, the 2008

gasoline prices were “90 percent higher” than the 1978 prices). In

contrast, the Con sumer Price Index in 2008 was approximately 3.3 times

its value in 1978. Bureau of Labor Statistics, U.S. De p’t of Labor,

Consumer Price Index (Sept. 2009), availa ble at ftp://ftp.bls.gov/pub

/special.requests/cpi/cpiai.txt.

4. 2008 ANNUAL ENERGY REVIEW, supra note 2, at xxviii, Fig. 34.

5. Id. at xxix, Fig. 38.

6. FED. TRADE COMM’N, REP. ON ACTIVITIES IN THE OIL AND NATURAL GAS

INDUS. (2009), availa ble at http://www.ftc.gov/os/2009/07/

P082108semiannualenergy.pdf (“[I]t bea rs repeating that the energy

130 Market Definition in Antitrust

FTC recently sued to block the merger of two refiners, Western Refining

and Giant Industries; investigated Chevron’s proposed acquisition of

most of USA Petroleum’s retail gasoline stations in California, an

investigation that ended when the parties abandoned the transaction;

examined the reasons for higher-than-anticipated gasoline prices in and

around Buffalo, New York, and in Northern Vermont; and sued to block

CCS Corporation’s (eventually abandoned) acquisition of Newpark

Environmental Services, which would have combined the leading

providers of waste disposal services to offshore oil and natural gas

exploration and production companies along the Gulf Coast.7 In

addition, in 2004, the FTC’s Bureau of Economics published a

comprehensive study of antitrust issues in the petroleum industry,

including market definition analysis.8 The FTC also published a more

recent staff study concerning gasoline prices.9

Market definition continues to be a key, often dispositive, factor in

the competitive analysis of transactions in the energy sector. This

chapter will explore market definition in three key energy resources

industries: coal, oil, and natural gas. Important factors relevant to

defining markets in all three industries include the ease with which

consumers can switch from one fuel source to another, the speed and

efficiency with which production facilities can be converted from

sector has long been, and remains today, one of [the FTC’s] most

important fields of endeavor for protecting the American public.”).

7. See William E. Kovacic, Comm’r, Fed. Trade Comm’n, Opening

Statement before the Committee on Commerce, Science, and

Transportation of the U.S. Senate (Apr. 10, 2007), a vailable a t

http://www.ftc.gov/speeches/kovacic/070410Kovacicsenatestatement.pdf;

FED. TRADE COMM’N, REP. ON ACTIVITIES IN THE OIL AND NATURAL GAS

INDUS. (2009), availa ble at http://www.ftc.gov/os/

2009/07/P082108semiannualenergy.pdf; FED. TRADE COMM’N

ENFORCEMENT ACTIONS IN INDUSTRY/SECTOR: ENERGY (FY 1996-FY

2009), availa ble at

http://www.ftc.gov/bc/caselist/industry/cases/energy/expanded/EnergyAll

.pdf; see genera lly BUREAU OF ECON., FED. TRADE COMM’N, THE

PETROLEUM INDUSTRY: MERGERS, STRUCTURAL CHANGE, AND

ANTITRUST ENFORCEMENT (Aug. 2004) , a vailable at

http://www.ftc.gov/os/2004/08/040813mergersinpetrolberpt.pdf

[hereinafter PETROLEUM INDUS. STUDY].

8. PETROLEUM INDUS. STUDY, supra note 7, at 21 -24.

9. FED. TRADE COMM’N, GASOLINE PRICE CHANGES AND THE PETROLEUM

INDUSTRY: AN UPDATE (Sept. 2011), availa ble at

www.ftc.gov/os/2011/09/110901gasolinepricereport.pdf.