Clearly, where oil
rather than money is the indispensable medium of
exchanges for a substantial volume of commerce, only
those possessed both of ample and geographically
dispersed resources of, as well as demands for, that
esoteric medium will be in a position to enter the
barter game on any substantial scale. The inevitable
consequence of this is that the field of eligible barter
participants is practically limited to the major
integrated companies which boast dominant national
positions in production, pipeline, transportation, and
refining.
Only such colossi with
geographically dispersed sources of, and demands for
both crude and refined petroleum, and controlling the
vital means of its transport, are genuinely situated to
reap the full fruits of a continental barter system. And
what is more, only those lesser enterprises (whether
producers or refiners) fortunate enough to be able to
achieve barter alliances with these colossi stand any
genuine chance of survival at all.
In all of this it
appears reasonably certain that the burgeoning
continental network of crude and products pipelines,
owned and dominated by these major oil companies (either
individually in varying combinations) has provided the
indispensable linkage for integrating and effectuating
this highly ramified barter-balancing system.
For given such a
physically-closed continental pipeline grid with its
manifold gathering, distribution and interconnection
potentialities, it is obvious that the major integrated
companies share an unrivaled opportunity to explore the
mutual advantages of shunting and rationalizing, as
between themselves, vast regional supply surpluses and
deficits while avoiding any disturbance of oil prices
(notably those critical crude prices upon which their
profitability as integrated enterprises, ultimately
depends).
In sum then, the
dominant integrated powers in the United States oil
industry appear to have evolved an effectual private
supply/demand balancing system embracing on the one hand
essentially monopolistic pipeline transport media, and
on the other hand a continentally pervasive mechanism of
barter which taken together, must inevitably have
far-reaching restraining effects upon interstate
commerce in petroleum.
Insofar as those major
integrated companies and their pipelines account for the
great bulk of interstate crude and product movements,
the conclusion seems inescapable that but for the
extensive barter arrangements existing between them,
their normally recurring surpluses and their deficits
would ultimately become prime movers and determinants of
price in a genuinely dynamic market open to all comers
(including non-integrated refiners, distributors, and
brokers).
Conversely, where
substantial volumes of crude and products are, in fact,
regularly diverted from, and circumvent any market price
mechanism in virtue of widespread barter among the
industry�s principle oil producer-refiner-distributors,
then it can surely be no exaggeration to infer a casual
[sic causal] relationship between that condition and the
prevailing thinness of spot markets and the relative
rigidity of critical crude �benchmark� prices.
The fact that the
Attorney General�s Compact reports to date have
repeatedly remarked the existence of just such crude
price rigidity, coupled with the above-outlined
indications that pipelines and barter (i.e. exchanges)
may be inextricably linked root elements contributing to
that condition suggest the need for a comprehensive
examination of the actual workings of this system and
its effects upon interstate commerce in petroleum.
Cautionary
Observations
In conclusion I would
offer a brief caution to the uninitiated who would
venture into the hybrid economic-legal domain of
Exchanges: It is a complicated, multifaceted domain
which needs be approached with care. Though I am not an
academic economist, nevertheless, my eclectic
interdisciplinary explorations have yielded special
insights into this complexity. That experience convinces
me that similar awareness is essential for the analyst
intent on serious work in this field.
The following points
are offered only to suggest the scope and complexity of
this subject:
First, Exchanges
needs to be understood both in detail and holistically.
o The exchange
phenomenon is not just one thing or combination of
independent things. It is a manifold of several
interrelated elements, which must be clearly
differentiated and then understood together in
relationship to each other.
o Exchanges display
considerable diversity: they appear in many different
forms, are utilized in many different situations, serve
many different purposes, perform many different
functions, and, hence, have many different consequences
and effects.
o Typology suggestive
of functional variety might involve some combination of
the following:
(1) Industrial vs.
Financial (e.g., Logistical vs. Tax)
(2) Strategic vs.
Tactical
(3) Temporal vs.
Spatial
(4) Long-term vs.
Medium term vs. Short term
(5) Local vs. Regional
vs. Interregional
(6) Domestic vs.
International
(7) Crude Oil vs.
Refined Products
(8) Storage terminal
vs. Transportation terminal
(9) Bulk terminal vs.
Wholesale distribution terminal
(10) Simple vs.
Complex (i.e., two-party vs. multiparty, etc.)
Secondly, because
this exchange issue is multi-dimensional, it needs to be
approached
broadly from an
interdisciplinary perspective.
o Relevant ECONOMIC
Tools & Disciplines
Game theory
Regional Economics
Spatial Competition
Location theory
Logistics
Econometrics, model
simulation
Operations research
(linear programming)
Optimization theory
o Relevant LEGAL Areas
Reciprocity
Joint Venture
Market Sharing
Market Stabilization
Division of
Territories/Markets
Shared Monopoly
(Oligopoly, Oligopsyny)
Conscious Parallelism
Exclusive Dealing
Refusal to Deal
Tying Agreements
Requirements Contracts
Price Discrimination
Basing-Point Pricing
Foreclosure
Barriers to Entry
Vertical Integration
(End)
