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Newsletter

Wednesday, June 20, 2007
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Oil Industry Scales Back Expansion Plans
A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.
With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.
Oil industry executives no longer believe there will be the demand for gasoline during the next decade to warrant the billions of dollars in refinery expansions — as much as 10 percent increase in new refining capacity — they anticipated as recently as a year ago.
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Source: CBS News
Harold Thinks! The oil industry has a point. Why should they invest more when they have us all over the barrel, so to speak? We have allowed the industry to consolidate until there is no real competition. Congress has even offered incentives to the oil companies to build refineries but to no avail. A new refinery has not been built in this country in over 30 years. I am not big on government’s involvement in business but it is time for them to step in to this mess. We are one natural disaster away from five-dollar gas and long lines at gas stations.
 
Here is a thought, let the government fund a few state of the art new refineries. Tell the oil barons if they cut production they will be severely penalized with a new tax on their profits. Shareholders will not like that.
 
How do we get the gas to consumers, let them buy it through the grocery industry. The Safeways, Krogers, Wal-marts and companies like Costco would be great competition and keep gas prices down.
 
I feel it is in the national interest to have enough refinery capacity to protect ourselves in case of a national emergency. What do you think?
FTC: Whole Foods Purchase of Wild Oats Would Lead to Higher Prices
The FTC says that the purchase of Wild Oats Markets by Whole Foods Market would increase concentration of the country’s natural and organic supermarkets and lead to increased prices, The New York Times reports. The agency said June 5 that it planned to block the acquisition of Wild Oats, the second-largest natural-foods grocer after Whole Foods. “Consumers have benefited directly from the price and quality competition between Whole Foods and Wild Oats,” the agency said in a sealed lawsuit filed this week, portions of which were released yesterday. “If the acquisition occurs, those benefits will be lost.”
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Source: Eviromentallleader.com
Harold Thinks! I get some great comments from my readers on articles. Here is what I said about the issue and the response from one of my readers.
 
Back when all the oil companies were merging I thought that the FTC should step in and stop those mergers. They didn’t see it my way and now look at the price of gas at the pump. I was pleasantly surprised when the old AT&T was broken into seven Baby Bells by the federal courts. Now each time there is a Bell merger I wonder why the FTC is allowing them. For those of you who don’t keep track, there are only two of the original seven Baby Bells left. I was surprised they allowed all those mergers. The news industry has been taken over by big news companies with more mergers on the way. A diverse news media is in our national interest but no effort has been made to stop these mergers. I don’t understand their logic in stopping the merger between Whole Foods and Wild Oats. Almost every week you read about another Grocery Chain expanding into organics. The competition in that sector is growing fast and with major players entering the market and even if they combined they will have to work very hard to compete. It doesn’t make sense to me. What do you think?
 
 Scott Redwood Thought!
! happen to agree with the FTC in this case. In fact, the FTC has stated recently that they were changing some of their rules on mergers/acquisitions because times have changed. They were using the same set of rules as they did over 25 years ago. Those days were different. Room for food industry merging is running out of ammunition. Back twenty years ago, we had more big players in the ring. And let's face it, Whole Foods and Wild Oats are the two biggest natural food chains around. Yes, there are some smaller stores, but not as big as these two chains. It would be like Kroger and Safeway merging together, two of the biggest guns in the fleet. As for Hannaford Bros., they are not a full scale natural food store. Conventional supermarket chains are not formatted to just natural foods. The common supermarket does not really compete much against Whole Foods or Wild Oats on natural foods. They are not known as a natural food store. Take it from me. I've been there. If you don't believe me, go to a typical supermarket and check out the natural food section, especially in the produce department. Is every aisle stocked like a Whole Foods or Wild Oats? No way. How about produce? You're lucky if you can find twenty items stocked in the department. The produce managers do not concentrate on the few organic items they are "forced" to handle by management. Just because the department has an "organic produce section" sign above the wall case at the end doesn't mean a customer will find all the items they want similar to a natural food store. It's not going to happen.
 
Go ahead. Check out your local supermarket chains, count the organic items they handle, compare that number with a Whole Foods or Wild Oats. Then tell me that's competition within the industry.  
 
Scott Redwood did a great job of explaining his position. If you have an opinion on any of the issue discussed here just send me your comments. I read them all.
 
If you want more news read the produce news section on www.agplus.net  If don't read the Newsletter the day it is published these articles will be under More Produce News as the news changes daily.

 

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