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Oil deal to pump prices?
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October 16, 2000: 3:56 p.m. ET
Previous deals spark big profits and higher gasoline prices, critics say
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NEW YORK (CNNfn) - As oil industry titan Chevron Corp. unveiled plans Monday to buy Texaco Inc. in a $35.7 billion stock deal, consumer advocacy groups warned that oil and fair gas prices do not mix.
Meanwhile, oil industry promoters say there has been no profit gusher for the oil companies and they maintain profit margins have been and remain below those of many industries.
U.S. Energy Secretary Bill Richardson said the  proposed Chevron-Texaco deal was "one of the inevitable outgrowths of the global economy."
"My initial view is positive," Richardson told reporters, "but the Federal Trade Commission does a very good oversight role of ensuring that consumers are protected."
U.S. PIRG, a national lobbying office for the consumer advocate Public Interest Research Groups, said the proposed merger "sets up another lose-lose-lose scenario for American consumers, democracy, and the environment."
Athan Manuel, director of the group's Artic Wilderness Campaign, issued a statement urging the Federal Trade Commission to block the deal.
"It's time to stop the oil industry merger media," Manuel said in a news release. "One of the consequences of the rash of oil industry mergers have been a lack of competition and record high gas prices for consumers. This merger would make a bad situation even worse."
Manuel pointed to the sudden increase of gas prices in Chicago over the summer, which, he said, started to fall as soon as government regulators announced an investigation.
"It's hard to believe that was a coincidence," he said.
Pumping the consumer?
Industry critics point to the recent Exxon-Mobil merger as an example of the merger mania's dark side.
Consumer group Public Citizen released a study over the summer stating that Exxon Mobil (XOM: Research, Estimates) lead the industry pack in record profits, earning $4.15 billion in the second quarter — 123 percent higher than the year-ago period.
Chevron (CHV: Research, Estimates) came next with $1.14 billion in quarterly profits, a 136 percent increase over the previous year, followed by Texaco (TX: Research, Estimates) with $641 million in profits, 124 percent more than 1999's second quarter.
All the profit taking occurred while consumers were paying record prices for gasoline, the group said.
Industry advocates dispute the notion of "obscene profits." In a statement titled "The Truth about Oil Industry Profits," the American Petroleum Institute, an industry support group said oil companies experience much greater volatility than most other industries.
While industry profit margins did increase by about 88.9 percent in the first six months of 2000, the API said the increase brought oil profit margins up to 6.8 percent, still less than the 7 percent profit margin for all industry.
"The truth is," the statement said, "that after the dismally low profit margins of 1999, oil companies are finally earning profit margins on a par with the rest of U.S. industry and there is nothing unconscionable about that." 
--from staff and wire reports.
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