Steven Pearlstein has written an article in the WaPo [reg] arguing that the oil companies in the US require a nationalised competitor in order to make the market, especially refineries and trading desks, efficient. He writes:
Standard’s first order of business would be to expand refining capacity in the face of the industry’s disciplined efforts to keep supply always a bit behind demand. It’s rather telling that, after complaining for years about the difficulties of siting and permitting, not a single company has taken up President Bush’s offer to site a new refinery on federal land and expedite the approval process.
I have seen the price of a gallon of petrol in the US go from $1.50 to $3.50 in the space of two years. You can argue all you want that US petrol prices need to increase, but that level of inflation is regressive, and many people are now facing weekly commuting bills that are double what they were two years ago.
What I don’t understand is, if, as Pearlstein argues, the oil companies have acted as an international cartel, deliberately restricted supply and have manipulated trading desks; then why haven’t we seen a low cost refiner/distributor – an oil version of Walmart. Surely the behaviour Pearlstein describes from the industry incumbents leads to new competitors undercutting them? If so, why haven’t they appeared?