Refinery mergers, approved by Bush, play price role.

President Bush has allowed an increase in oil refinery mergers to go unchecked since he took office and critics suggest he may have contributed to the highest gasoline prices in 20 years.

The Bush administration approved 33 takeovers totaling $19.5 billion, on top of 21 deals worth $7.3 billion under President Bill Clinton, Bloomberg data shows. Reduced supplies were already pushing up gas prices in Clinton's term, according to a Federal Trade Commission study conducted after pump prices rose to more than $2 a gallon in Milwaukee and Chicago in 2000.

"We're in a much worse position than we were when the federal government broke up the Rockefeller oil companies of the early 1900s," said Jon Meade Huntsman, founder of Salt Lake City-based Huntsman Co., the largest privately held chemicals maker. "The average guy on the street is getting killed because this administration does not care."

Bush has chosen to focus on broadening access to federal land for oil exploration and developing renewable energy sources to minimize price volatility. The administration's proposed energy bill remains stalled in Congress.

Under Bush, the FTC hasn't tried to block any proposed refinery takeovers. During Clinton's eight years in office, the government sued once to block an oil industry merger.

In the first quarter, a rise in gasoline prices helped refiners generate the highest margins from refining crude oil into gasoline and other fuels since at least 1990. ConocoPhillips, the largest U.S. oil refiner, last month posted its biggest quarterly profit since the 2002 acquisition that formed the company.

From 1993 to 2003, the market share of the five-biggest U.S. refiners grew from 35 percent to 52 percent, according to Public

Citizen, a consumer activist group. For the top 10 refiners, market share rose from 56 percent to 79 percent. The Consumer Federation of America says that 67 percent on the West Coast were controlled by the top four refiners as of 2000.

Sen. Carl Levin, a Michigan Democrat and ranking minority member on the Permanent Subcommittee on Investigations, said in 2002 that the FTC "needs to be more cautious about approving mergers."

The FTC reviews regional concentration when considering refinery mergers, said general counsel William Kovacic.

"It may be possible in selected markets for individual firms to unilaterally increase prices, particularly where there are specific supply disruptions, but the capacity to do that is a separate question from the question: Did the mergers make it easier," Kovacic said. "We think, and again it's a fair point for debate, the mergers haven't contributed to this."

He said regional fuel requirements that prevent some types of gasoline from being sold in different markets might be more to blame for crimping supply.

Between 1977 and 2002, the number of U.S. refineries dropped to 153 from 282. Refining capacity over that period has increased 2.4 percent to 16.8 million barrels a day, according to the Energy Department. U.S. demand for gasoline has grown 27 percent in that period.

Dan Tulis, who manages $20 million at Elco Management Co. including shares of ChevronTexaco and BP Plc, said mergers shouldn't be blamed for higher gas prices. Many refineries may have been saved from closing because of the mergers, he said, noting "If they didn't put them together and they closed the refineries down, it would be worse."

Mark Cooper, director of research for the Consumer Federation of America, says the FTC must fine-tune its analysis of market power in the energy industry to reflect the fact that supply and demand do not respond quickly to prices.

"If the number of people in the market is small enough, they don't have to collude to extract nearly all the profits a monopolist would," Cooper said.

Monitoring the oil industry needs to include consideration of "all the underlying factors" that may cause prices to shift and change a company's behavior, said Diana Moss, who oversaw utility mergers at the Federal Energy Regulatory Commission from 1995 to 2001. The president should ensure regulators such as the FTC review all the consequences of proposed mergers, said Moss, who is now vice president of the American Antitrust Institute. "A new policy or a tuned-up policy may be in order here."