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Home Research & AcademiaPublicationsStudy ReportsReports under FTC Study Grants2006Structure, Behavior, and Competition Law Enforcement in Domestic Petroleum Industry
Research & Academia

The structural change has happened in domestic petroleum market and leaded to an increase in market competition ever since the government deregulated the import restrictions and allowed Formosa Petroleum Co. to enter into the market. However, recently, the petroleum prices turn to rise for the sake of soaring international oil prices. Since the petroleum is a necessity in daily life, the FTC is frequently criticized for not acting to stop the price rise by the press. These criticisms not only disturb the FTC’s implementation, but also instigate a conflict between competition and regulation. This research project refers to foreign experiences on the market liberalization and some competition law cases to explore several topics on domestic petroleum market. These issues include the degree of market competition, the coordination between competition and regulation, supervision on the oligopolistic pricing, market channel of the petroleum and some related price notions. The concrete suggestions of this project include:

Suggestion 1: The FTC should cautiously identify if the oil companies monopolize the gasoline market or if they use the excess inventory to raise the gasoline prices when any distortion happens in the market.

Suggestion 2: The FTC should carefully identify the exploitative abuse stipulated in Section 2 of Article 10. In most situations, the suspected illegal behaviors conducted by the oil companies should be scrutinized by using Articles 7 and 14 to see if these behaviors are the concerted actions. Unless the increases of gasoline price are significantly and persistently higher than the increases of the procurement prices of crude oil, can these behaviors be subject to exploitative abuse stipulated in Section 2 of Article 10.

Suggestion 3: The FTC should clarify the principle of state action exemption so as to assure the adequacy of exemption from regulation pertaining to the Competition Law.

Suggestion 4: If the oil companies adjust gasoline prices pertaining to any statute of regulation, then they should report the price changes to the competent authority. The competent authority should adequately supervise these price adjustments. Besides, the relevant statute should be clearly articulated and affirmatively expressed with regard to these regulations.

Suggestion5: The FTC should implement monitoring mechanism to supervise the pricing behaviors in the oligopolsitc market so as to manipulate with the gasoline price changes. This might authorize the FTC the power to request the oligopolistic firms to present the reasons why they raise the gasoline prices. On that ground, the FTC could decide if the investigation shall be conducted or not.

Suggestion 6: We recommend the government to execute the long-term and short-term implementations to segregate the gasoline refinery and distribution channel of the Chinese Petroleum Corp.. This might help to improve market structure of the oil industry.

Updated at:2010-01-13 15:20:49