| This dissertation reports and analyzes recent data on competition in the United States petroleum pipeline industry. It first discusses the technological, legal, and regulatory history and structure of the industry. Individual markets are then defined and analyzed, resulting in hypotheses concerning the probable level of competition in the various different types of markets. These hypotheses are then tested using data on rates charged by various pipeline firms. Finally, industry rates of return on capital are analyzed in an effort to determine whether regulation has effectively controlled the potential monopolistic profits.;Using these market definitions, individual pipeline markets were defined, market participants were enumerated, and where possible, market shares were computed. Pipelines were found to possess considerable monopsony power in the markets where crude oil is gathered from producers. In the markets where the crude is delivered to refiners, pipeline market power was found to be greatly diluted by the availability of water transport in most refinery areas. Water transport also causes the markets in which pipelines receive products from refiners to be relatively competitive. In those markets where products are delivered to final consumers there is a diversity of structures ranging from markets of complete monopoly to markets which have more than thirty firms.;The data on transport rates revealed that there is a tendency on the part of pipelines to subsidize operations in competitive markets with monopoly profits acquired in non-competitive markets. Regulation limits this behavior but does not eliminate it.;Two principal policy recommendations result from this study. First, from the consumer's perspective, anticompetitive problems associated with petroleum products pipelines are more significant than those associated with crude oil pipelines. While pipeline monopsony power in the crude oil fields may involve distorted investment incentives, the competition in refiner markets assures that crude oil pipeline market power will not affect the prices consumers pay for petroleum products. Hence, there will be no crude pipeline-induced inefficiency in consumption. Anticompetitive problems associated with petroleum products pipelines, however, do affect consumer prices. Thus it may be wise for regulators to focus first on the products portion of the industry.;The principal theoretical finding of the dissertation is that the usual definition of a pipeline's product as "transportation services from A to B" is not particularly useful. Instead, each firm is viewed as a participant in two types of markets, one as a receiver and the other as a deliverer. In the first type of market the pipeline competes with all other receivers of petroleum, whether they be pipelines, water-carriers, refiners, or consumers. Thus, the pipeline connecting A and B competes not only with other firms offering transportation services from A to B, but also with firms offering transportation from A to C, D, E, and so forth. In addition, the pipeline must compete with firms who are interested in acquiring petroleum for consumption at A. Similarly, in the delivery market, the pipeline must compete with all other firms supplying oil to a particular location regardless of their points of origin.;Second, very little is known about how well pipelines live up to their obligations to provide "common carrier" non-discriminatory access to pipeline facilities. Data must be collected which will allow regulators to address this issue at an early date. |
