(Source: Jalopnik)

Image Courtesy: Jalopnik

Now that the President has signed the “Cash For Clunkers” into a bill, a lot of you may be thinking hard about trading your old meta for a shiny new one.  Through various articles Transportgooru has already discussed in great lengths about the details associated with the Cash for Clunkers, including the eligibility criteria for trading your old vehicle.

To add to that, our good friends at Jalopnik have put together this awesome list (see below), which I think is a must read for anyone who is contemplating a trade under Cash for Clunkers program.  Here is the list in reverse order.

5.) Buy A Clunker Now!

Some unscrupulous sellers may try and convince you to buy a clunker for a few hundred dollars with the promise of being able to trade it in for a $4,500 voucher. In reality, if you haven’t owned your car and kept it running and insured for a year you’re not eligible. Don’t buy a beater unless you want to keep it for a while.

4.) Trade In Your Car Early! –

We’ve read reports on forums of people already taking advantage of the Cash for Clunkers bill. In reality, they’re being taken advantage of. The law has been signed, but the National Highway Transportation Safety Administration hasn’t finalized the rules. It probably won’t go into affect until after July 24th. If you are being offered a “voucher” on your clunker you’re really just getting money for your trade-in, which the dealer can then resell. The most you lose is your car, but the dealer could face a fine of up to $15,000.

3.) Scrap A Car Worth More Than The Voucher

The used car market isn’t great right now, but this doesn’t mean your vehicle doesn’t have some value. Make sure to check the value of your car using a resource like KBB before trading in an older car that, it turns out, is worth more than $4,500 or $3,500 on the open market. Dealers have a greater incentive to sell you a new car and scrap your old one than to get the value of your trade-in “clunker.”

2.) Get Denied For Other Discounts

The voucher program is not designed to be a stand-alone discount program, meaning you’re still eligible for whatever other discounts automakers are offering (and there are a lot of those). With 0% financing and thousands cash back you’re getting cheated if you just get the value of your trade-in off a new car. The average incentive, according to Edmunds, was $2,930 for June. So you could possibly get $4,500 + $3,000 off of a new car.

1.) Avoid Moving Up To A More Profitable Class

If you own a truck or SUV you can use your voucher to trade it in for a car and, likely, get a larger voucher. Many dealerships will want to put you into a new truck because they’re more expensive than most cars, but if you don’t need a truck you can trade your old one in and find an inexpensive car with 10 MPG better fuel economy, which qualifies you for $4,500. For example, if you’ve got a 1991 V6 Ford F-150 you can trade it in for a $15,000 2009 Ford Focus for your kid and get the full $4,500 off, instead of paying upwards of $20,000 for a new truck and only getting a $3,500 voucher.

(Sources: Autobloggreen, Autotropolis)

Hyundai is doing very well in both the automotive quality and marketing arenas. Hyundai recently scored high in the latest 2009 J.D. Power Initial Quality Study. Many analysts were surprised that Hyundai finished fourth behind a stellar cast consisting of Lexus, Porsche and Cadillac.

On the marketing side, Hyundai Assurance struck a cord with the American consumers when it offered payment protection in the event of job loss. Now Hyundai is looking to give consumers increased peace of mind over of the volatility of gas prices, which have swung from under $2 a gallon a few months ago to nearly $3 at the beginning of summer.

Many consumers are sitting on the fence waiting to see which direction the price of gasoline will take. After a period of relatively cheap fuel, over the last several months the price of a gallon has started to climb significantly once again.

The newest promotion, Gas Lock, fixes the price of regular unleaded at $1.49 per gallon for the next year. The program runs July 1 through August 31, and eligible vehicles include the Accent, Sonata, Tiburon, Elantra, Elantra Touring, Entourage, Azera, Santa Fe, Tucson and Veracruz. Customers choosing to utilize Gas Lock will forgo $1,000 in available rebates, making the incentive a gamble that gas prices will remain high.

Hyundai is able to finance its Assurance Gas Lock through a partnership with a commodities company named Pricelock. Without having to dust off your MBA to figure this one out it appears that Pricelock purchases call options in the commodity markets to lock in future gasoline prices. Hyundai will make up the difference.

Shown below is the Press Release from Hyundai:

(Source: AFP via Google, ITDP & Jakarta Post)

New laws requiring disabled pedestrians to wear traffic signs have met with frustration and derision in Indonesia, where in the eyes of the law cars have taken priority over people.

The laws will do nothing to improve road safety or ease the traffic that is choking the life out of the capital city of some 12 million people, and serve only to highlight official incompetence, analysts said.

Within five years, if nothing changes, experts predict Jakarta will reach total gridlock, with every main road and backstreet clogged with barely moving, pollution-spewing cars.

That’s too late for the long-awaited urban rail link known as the Mass Rapid Transit (MRT), which has only just entered the design stage and won’t be operational until 2016 at the earliest.

“Just like a big flood, Jakarta could be paralysed. The city’s mobility will die,” University of Indonesia researcher Nyoman Teguh Prasidha said.

Instead of requiring level footpaths and ramps, lawmakers voted unanimously this month to demand disabled people wear signs announcing their condition so motorists won’t run them down as they cross the street.

Experts say the new traffic law is sadly typical of a country which for decades has allowed cars and an obsession with car ownership to run rampant over basic imperatives of urban planning.

“It is strange when handicapped people are asked to carry extra burdens and obligations,” Institute of Transportation Studies (Instran) chairman Darmaningtyas said.

A 2004 study by the Japan International Cooperation Agency found that traffic jams cost Jakarta some 8.3 trillion rupiah (822 million dollars) a year in extra fuel consumption, lost productivity and health impact.

Paralyzing traffic jams and severe air pollution are the most frequent answers when people are asked what they know about Jakarta. Motorized vehicle ownerships increase in line with a rise in income per capita.

An Institute for Transportation and Development Policy (ITDP) study notes that motorized vehicle ownership is growing at 9 percent every year, with more than 1,500 new registrations being filed a day for motorcycles and 500 a day for cars.  The study discusses various options including BRT, incentives for biking, etc to manage the growing congestion problem that is now threatening to cripple the growth of the country’s economy and adversely affect the quality of life of its citizens.

Now, growth of the vehicle population is not the only problem.  The drivers behind the wheel are adding to the chaos on the roads.  An article that recently appeared in the online edition of Jakarta Post, says the following: Driving in Jakarta is nothing short of chaotic, thanks to the huge quantity of people using the roads, the often terrible condition of the roads and the vast variety of vehicles there are. All of this chaos is only made worse by drivers who are reckless and dismissive of other road users.

There are drivers that seem utterly oblivious to there being anybody else on the roads except themselves. Perhaps they are too comfortable in the enclosed air-conditioned capsule that is their vehicle, as they listen to pumped-up stereophonic music or even watch small video screens, to pay any attention or care about anyone else on the roads.

Click here to read the entire article.

(Source: Wired)

Image Courtesy: Apture

Seven billion gallons of gasoline. That’s how much fuel America consumes each year just running the air conditioning in their cars. And don’t think riding with the windows down is the answer; the Mythbusters have long since debunked that solution.

That’s 5.5 percent of the country’s fuel use, and the Environmental Protection Agency (EPA) says auto air conditioning contributes more than 58 million metric tons of carbon dioxide emissions annually. Factor in a 50 million additional tons of CO2 due to refrigerant leakage and you have a environmentally unhealthy result that no American would be proud of.

In the age of gaining independence from oil and seeking responsible consumption, the Department of Energy (DOE) has funded the National Renewable Energy Lab (NREL) to seek solutions to make air conditioning and other similar ancillary systems more efficient. The findings of this research can help automakers hit President Obama’s target for increased average fuel efficiency and put a dent in the carbon footprint of American cars. Research on cabin cooling efficiency is aimed at three areas:

(Source: The Local, Germany)

Image Courtesy: Apture

An American tourist caused an accident near Karlsfeld over the weekend, banging up some €45,000 in damages when he followed an outdated navigation system prompt in the wrong direction, daily TZ reported on Monday.

According to the paper, the man’s Mercedes Vito rental car system had not been updated with the new exit from the B471 motorway near Karlsfeld, 20 minutes north of Munich.

The oversight caused him to drive himself and seven passengers into oncoming traffic, where they came face to face with a Peugeot. Both cars wound up veering off the road and into a ditch, the paper said.

The Vito landed on the roof, but all eight passengers in the Mercedes escaped injuries. The Peugeot driver suffered a whiplash injury.

Click here to read the entire article.

(Source: Autobloggreen, Netherlands Environmental Assessment Agency, Guardian, UK)

• Financial crisis, pricey oil halve rise in CO2 emissions
• Developing nations now emit more than industrialised world

Image Courtesy: Netherlands Environmental Assessment Agency (PBL)

High oil prices and the impact of a global recession halved yearly rises in global greenhouse gases from burning fossil fuels in 2008, the first evidence of an impact from the financial crisis, a study said on Thursday.

Also for the first time, the share of global carbon emissions from developing countries was higher than from industrialised nations, at 50.3 percent. China recently overtook the United States as the world’s top carbon emitter.

The good news comes to us via a study by the Netherlands Environmental Assessment Agency (PBL) which points out that the use of biofuels and an increase in the use of renewables has helped achieve the encouraging result. It’s also worth noting that America actually reduced emissions by 3 percent and that the continuing increases are mostly occurring in developing countries. One final positive worth underlining is that 2008 was the first year investment in renewables was greater than investments in fossil-fuelled technologies.

Thursday’s data showed that global carbon dioxide emissions from burning fossil fuels and from cement production reached 31.6 billion tonnes in 2008, up 40 percent from 1990 levels and a doubling since 1970. Scientists say that annual increases in global greenhouse gas emissions must level off and start to fall by 2015-2020 to avoid the worst effects of climate change.

Emissions increased by 1.7 percent in 2008 compared with 3.3 percent in 2007. Since 2002, the average annual increase was almost 4 percent, the study said.

Click here to read the results of the entire PBL study. Below is an interesting exceprt from the report.

Trends in USA, European Union, China, Russia and India

In total, CO2 emissions of the USA and the European Union decreased by about 3% and 1.5% in 2008, Although China’s emissions showed an increase of 6%, this is the lowest increase since 2001. Cement production in China showed a similar pattern, with a 2.5% increase in 2008, a drop from 9.5% in 2007. The declining increase of China’s emissions fits in the trend since 2004, when its emissions increased by 17%. Smaller contributions to increasing global emissions were made by India and Russia, which emissions increased by 7% and 2%, respectively.

Since 1990, CO2 emissions per person of China have increased from 2 to 5.5 tonne of CO2 per capita and decreased from 9 to 8.5 for the EU-15 and from 19.5 to 18.5 for the USA. These changes reflect the large economic development of China, structural changes in national and global economies and the impact of climate and energy policies.

It can be observed that due to its fast economic development, per capita emissions of China quickly approaches levels that are common within the industrialised countries of the Annex I group under the Kyoto Protocol. Among the largest countries, other countries that show fast increasing per capita emissions are South Korea, Iran and Australia. On the other hand per capita emissions of the EU-15 and the USA are gradually decreasing over time. Those of Russia and Ukraine have decreased fast since 1990, although the emissions in 1990 and therefore the trend are rather uncertain due to the dissolution of the former Soviet Union in the early 1990s.

(Source:  Reuters, Times of India, SIFY, Bloomberg)

• Tata FY09 loss $520 million, first in eight years
• Jaguar Land Rover (JLR) unit 10-mth loss of 306 mln pounds
• Warns of more job cuts, plant closures
• Shares end 0.8 pct higher in Mumbai market

Image Courtesy: Apture - The Tata top and Jaguar auto company logos Top Indian vehicle

India’s Tata Motors said Friday that it suffered a loss of 25.05 billion rupees ($521.8 million) after taxes in the past fiscal year as the global meltdown exacted a toll on the auto industry worldwide.

The loss came after a year in which the company recorded a profit of 21.67 billion rupees ($451 million) after taxes, the company said in a statement.

Tata Motors reported a consolidated gross revenue of 741.51 billion rupees ($15.44 billion) in 2008-2009. India’s financial year runs from April 1 to March 31.  About 120,000 Land Rovers were sold in the 10 months ended March 31, down from 198,000 a year ago, Chief Financial Officer C. Ramakrishnan told reporters today. Jaguar sales fell to 47,000 in the same period from 48,800.

“The consolidated financial performance of the company is not comparable to 2007-08 on account of the acquisition of Jaguar Land Rover in June 2008,” it said.

The firm, which controls 60 percent of the world’s fifth-biggest truck and bus market, said it was readying for major belt-tightening, including deferring capital expenditure wherever possible to keep a tight rein on costs.

The company said sales across the group were hit by the global economic downturn, which saw demand and vehicle financing dry up.

“The company has actively responded to this changed situation by taking a number of urgent and long-term measures. These include cutting costs drastically and working on a plan of substantial cost reduction, aligning production with demand and tight control over cash flows,” the company said in a statement.

“At this moment, things are beginning to improve only marginally. There may be more job losses and more shut downs of plants if required,” Sky News quoted Tata Motors vice-chairman, Ravi Kant, as saying.

Tata Motors said the Jaguar Land Rover unit it bought in 2008 posted a loss after tax of 306 million pounds ($504 million) in the 10 months of the fiscal year to March 2009 as a brutal global recession crippled car sales, primarily luxury and sports utility vehicles.

Tata Motors is continuing talks with the U.K government to secure a guarantee for a 340-million pound loan approved by the European Investment Bank for Jaguar and Land Rover, Kant said. It has the option to get the guarantee from private banks, he said.

JLR sold 167,000 vehicles for the 10 months to March, compared with 246,000 in the same period the year before.

The economic crisis has sent two of America’s three big carmakers into receivership and is set to plunge Toyota Motor Corp deeper into loss.

(Source: Reuters, New York Times, Washington Post, fivethirtyeight.com & CNN)

Image Courtesy: Climatecrisis.net - An Inconvenient Truth

The U.S. House of Representatives on Friday narrowly passed a climate change bill that would create a national system to cap greenhouse gas emissions and allow trade of such credits. Only eight Republicans joined Democrats in backing the measure. Prospects for Senate passage this year are uncertain. States that have set the U.S. agenda on addressing greenhouse gas emissions are lining up behind a federal climate bill, fearing signs of dissent would weaken a plan that still faces hurdles.

The vote was the first time either house of Congress had approved a bill meant to curb the heat-trapping gases scientists have linked to climate change. The legislation, which passed despite deep divisions among Democrats, could lead to profound changes in many sectors of the economy, including electric power generation, agriculture, manufacturing and construction.

There was no derth of drama in the House from the moment the legislators began the day’s proceedings.  The Democrats released a 301-page amendment to the bill at 3:09 a.m. Friday, drawing protest from Republican Leader John Boehner, R-Ohio.  “This is the biggest job-killing bill that has ever been on the floor of the House of Representatives. Right here. This bill,” Boehner said.

The leaders of the House are customarily granted unlimited speaking time, but when the Boehner’s speech went more than 2½ hours, Democrats objected.  “Is this an attempt to try to get some people to leave on a close vote?” asked Rep Henry Waxman, D-California, the bill’s lead sponsor.

President Obama hailed the House passage of the bill as “a bold and necessary step.” Mr. Obama had lobbied wavering lawmakers in recent days, and Secretary of State Hillary Rodham Clinton and former Vice President Al Gore had made personal appeals to dozens of fence-sitters.

But the legislation, a patchwork of compromises, falls far short of what many European governments and environmentalists have said is needed to avert the worst effects of global warming. And it pitted liberal Democrats from the East and West Coasts against more conservative Democrats from areas dependent on coal for electricity and on heavy manufacturing for jobs.

The House legislation reflects a series of concessions necessary to attract the support of Democrats from different regions and with different ideologies. In the months of horse-trading before the vote Friday, the bill’s targets for emissions of heat-trapping gases were weakened, its mandate for renewable electricity was scaled back, and incentives for industries were sweetened.

Several House members expressed concern about the market to be created in carbon allowances, saying it posed the same risks as those in markets in other kinds of derivatives. Regulation of such markets would be divided among the Environmental Protection Agency, the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission.

Following is a list of key provisions of the landmark bill (thanks to Washington Post):

• Emissions from a large sector of the U.S. economy, including power plants, factories and auto tailpipes, will be required to be cut 17 percent below their 2005 levels by 2020, and 83 percent below those levels by 2050.
• These reductions would be managed by requiring emitters to amass buyable, sellable “credits” equal to their pollution.
• About 85 percent of these credits would be given away for free, many of them with the mandate that electricity distributors sell them and use the proceeds to soften the blow of rising energy prices. Environmentalists had wanted the government to auction them all off.
• Electricity producers would be required to get at least 15 percent of their energy from renewable sources by 2020, with up to 5 percent more energy saved from new efficiency measures. The two figures must add up to 20 percent.
• Polluters could also balance out some of their emissions by purchasing carbon “offsets,” which are official certificates that greenhouse gas emissions have been avoided, or taken out of the air. In a last-minute amendment, oversight over offsets generated on farms was taken from the Environmental Protection Agency and given to the Agriculture Department.
• A new Clean Energy Deployment Administration funded with $7.5 billion in “green bonds” would provide government money to private companies investing in environment-friendly technologies.

Nearly half the U.S. states have moved toward curbing greenhouse gas emissions and want the federal government to learn from their experience in creating systems to cap emissions and trade pollution credits.  States that have set the U.S. agenda on addressing greenhouse gas emissions are lining up behind a federal climate bill, fearing signs of dissent would weaken a plan that still faces hurdles.

Image Courtesy: www.fivethirtyeight.com

At the heart of the legislation is a cap-and-trade system that sets a limit on overall emissions of heat-trapping gases while allowing utilities, manufacturers and other emitters to trade pollution permits, or allowances, among themselves.

The cap would grow tighter over the years, pushing up the price of emissions and presumably driving industry to find cleaner ways of making energy.

Regional considerations tend to loom larger in debates over environmental policy than in other sorts of affairs. Some states consume more energy than others. Some states have more carbon-intensive economies than others.

Some states are more or less likely to be negatively impacted by global warming. And some states are better equipped to take advantage of green energy development.

One of the first of those concerns: household energy usage. The goal here is simple: the Congressional Budget Office recently put out an estimate (.pdf) of the costs of the Waxman-Markey cap-and-trade bill. The CBO estimated that the average American household would wind up paying a net of $175 in additional energy costs in the year it benchmarked, which was 2020. But how does that cost translate to individual states?

Our renowned statistics whiz at fivethiryeight.com has come up with a brilliant way to translate the CBO’s numbers, based on his interpretation of the CBO’s assumptions, to the level of individual states, making it easy for us common folk to understand what is to be expected when this cap and trade takes effect  ( Transportgooru recommends this as a must read article, especially if you care to know about the the nuts and bolts of “cap-and-trade” system)

(Source: New York Times – Wheels Blog, Sec.  LaHood’s Fast Lane Blog, U.S. News and World Report)

First of all, it’s no longer Cash-for-Clunkers. The program is now called the Car Allowance Rebate System (C.A.R.S.).  The program, which President Obama signed into law on Thursday, pays consumers up to $4,500 in credit for trading in their cars or trucks for those that are more fuel efficient. The law allocates $1 billion for the program.

The incentive program begins within 30 days of today’s bill signing by the President. The final day for an eligible purchase or lease is November 1, 2009, or when DOT exhausts the funds set aside for the program, whichever occurs first. The credit is not retroactive prior to the start of the program and cannot be applied toward the purchase of used vehicles.

Of course, there are plenty of regulations to determine what vehicles qualify for the credit. The National Highway Traffic Safety Administration, which is overseeing the program, has put together this Web site to help consumers who would like to participate in the program.

Image Courtesy: USDOT Secretary Ray LaHood's Fast Lane Blog

Today, the Transportation Secretary Ray LaHood wrote on his blog: “This program helps consumers pay for new, more fuel-efficient vehicles when they trade in less fuel-efficient cars or trucks. Stimulating the automobile industry while improving the environment and reducing fuel consumption–these are outcomes the DOT is pleased to support.

Congress and the Obama Administration recognize this is an important time for the automobile industry. And, the CARS program will help boost car and truck sales. Moreover, since the auto industry has improved vehicle safety and reduced vehicle emissions over the years, we are also excited about a program that puts vehicles on the road that are safer, pollute less, and get more miles to the gallon than the vehicles they replace.

CARS will be implemented by DOT’s National Highway Traffic Safety Administration (NHTSA). It’s a new responsibility this department welcomes; I know the folks in NHTSA stand ready to fulfill their new charge.  I encourage everyone to learn more about the program from the website, www.cars.gov, or call NHTSA’s Auto Hotline at 1-888-DASH-2-DOT (1-888-327-4236). ”

The C.A.R.S. rebate does not count on top of the trade-in value of your vehicle. In the F.A.Q. section of CARS.gov: “The law requires your trade-in vehicle to be destroyed. Therefore, the value you negotiate with the dealer for your trade-in vehicle is not likely to exceed its scrap value.”

An Important FYI item: N.H.T.S.A. warns consumers of unofficial C.A.R.S. Web sites that are now popping up, reports USA Today. “Some want a lot of personal information, and talk about consumers being able to pre-register,” said Eric Bolton, a N.H.T.S.A. spokesman. “Consumers don’t have to register for this program at all.”

For those of you who are contemplating the purchase of a new vehicle under this program, here is a wonderful guide put together by the U.S. News and World Report:

10 Things You Should Know About Cash for Clunkers Car Allowance Rebate System”

1. What’s the official definition of a clunker? A driveable car made within the last 25 years, with a fuel economy rating of no more than 18 mpg. To learn more about the combined city/highway fuel-economy of your car, check out the Car Allowance Rebate System site.

2. Here’s how the program works: you trade in your old car for cash towards the purchase of a new, more efficient one. The better the mileage of the new car , the more money you’ll get towards its purchase – either $3,500 or $4,500. Check out Jalponik’s handy chart to figure out how much you might be able to claim.  The minimum combined fuel economy of a new car purchased under the program must be at least 22 mpg, while new small trucks and SUVs have to get at least 18 mpg, and large trucks have to get 15 mpg. The old cars will be salvaged once they’re turned in.

3. Consumers should act fast. The bill provides vouchers for one million purchases, and the window of time is only fron July 1 to November 1. The bill will be revisited in the fall , and some changes may be made at that time.

4. The program will cost $4 billion. Funds will come from TARP.

5. Sorry, would-be entrepreneurs: it’s off-limits to buy an old car and “flip” it for the program – the car must have been insured by the same owner for at least one year before the trade.

6. The environmental idea behind the bill is that it takes old, inefficient vehicles off of the road. But some environmentalists are actually opposed to the bill because it takes functioning cars off of the road before their time is up, and does not permit the vouchers to go towards used vehicles, even if they are more fuel-efficient. Sen. Dianne Feinstein, who sponsored an alternate bill stated that the current version undermines fuel efficiency standards and provides “handouts for Hummers.” On the other hand, some argue that higher fuel standards would disproportionately benefit foreign cars, denying American automakers their much-needed boost.

7. The economic incentive of the bill is to jump-start drowsy auto sales. According to Bloomberg, similar programs worldwide have raised auto sales 25 percent to 40 percent in Germany, 15 percent in China and 8 percent in France.

8. Even if it’s not designed entirely the way environmentalists had hoped, there are still green benefits. Says Treehugger: “One positive effect the bill could have, though, is simply to further advance the presence of ‘fuel efficiency’ as a reward term in the skeptical American consumer market. Yes, hybrids continue to sell, but not to 99 percent of the population. The bill could, albeit in a relatively minor way, serve to advance an attitude that places importance on fuel efficiency in the future.”

9. Cash for Clunkers is expected to have a great impact on the Hispanic community. That’s why the program is getting a celebrity endorsement from Dancing With The Stars’ Cristian de la Fuente and Ugly Betty’s Angelica Vale.

10. As always, buyer beware. It doesn’t make sense to trade in your vehicle unless its value is less than or equal to what you’d get in the program. Edmunds has identified a list of cars that are guaranteed to be worth less than the value of the voucher. You can find it here (PDF). Said ABC News Consumer Correspondent Elisabeth Leamy, “From a strictly consumer standpoint, the Cash for Clunkers program is not a great deal. Yes, if you are bent on buying brand new, you will save money. But the savings are nothing compared with how well you can do by buying a used car.”

(Source: U.S. Government Accountability Office)

Background

In 2008, GAO reported that 1,088 oil industry mergers occurred between 2000 and 2007. Given the potential for price effects, GAO recommended that the Federal Trade Commission (FTC), the agency with the authority to maintain petroleum industry competition, undertake more regular retrospective reviews of past petroleum industry mergers, and FTC said it would consider this recommendation. GAO was asked to conduct such a review of its own to determine how mergers and market concentration—a measure of the number and market shares of firms in a market—affected wholesale gasoline prices since 2000.

GAO examined the effects of mergers and market concentration using an economic model that ruled out the effects of many other factors. GAO consulted with a number of experts and used both public and private data in developing the model. GAO tested the model under a variety of assumptions to address some of its limitations. GAO also interviewed petroleum market participants.

Study Findings

Image Courtesy: GAO

GAO examined seven mergers that occurred since 2000—ranging in value and geography and for which there was available gasoline pricing data (see table)—and found three that were associated with statistically significant increases or decreases in wholesale gasoline prices. Specifically, GAO found that the mergers of Valero Energy with Ultramar Diamond Shamrock and Valero Energy with Premcor, which both involved the acquisition of refineries, were associated with estimated average price increases of about 1 cent per gallon each. In addition, GAO found that the merger of Phillips Petroleum with Conoco, which primarily involved the acquisition of oil exploration and production assets, was associated with an estimated average decrease in wholesale gasoline prices across cities affected by the merger of nearly 2 cents per gallon. This analysis provides an indicator of the impact that petroleum industry mergers can have on wholesale gasoline prices. Additional analysis would be needed to explain the price effects that GAO estimated.

GAO used two separate measures of market concentration, one which measured the number of sellers at wholesale gasoline terminals and another which measured the market share of refiners supplying gasoline to those sellers, and found that less concentrated markets were statistically significantly associated with lower gasoline prices. For example, for wholesale terminals with more sellers—i.e., terminals that were less concentrated—GAO estimated that prices were about 8 cents per gallon lower at terminals with 14 sellers than at terminals that had only 9 sellers. This result is consistent with the idea that markets with more sellers are likely to be more competitive, resulting in lower prices. Using the second measure of concentration, GAO similarly found a statistically significant association between prices and the level of refinery concentration, with less concentrated groups of refineries associated with lower prices.

GAO Recommendation

This study reinforces the need to review past petroleum industry mergers, and GAO continues to recommend that FTC conduct such reviews more regularly and develop risk-based guidelines to determine when to conduct them. FTC reviewed a draft of this report and supports GAO’s recommendation to conduct more reviews of past petroleum industry mergers.

Click here to download the full report.