Overpricing Report Wrong, Arco Charges

Atlantic Richfield Co. on Thursday attacked as flawed and erroneous a report released last month by a national consumer group charging oil companies with price manipulation to destroy competition.

In a study of its own, Arco questioned the facts, assumptions and conclusions of a 10-year report by Citizen Action, a Washington-based consumer group. The group’s report charged oil companies with a conspiracy to drive independent gasoline marketers out of business in order to monopolize the nation’s fuel markets and drive prices up.

“You can’t just let stuff like this lay around--baseless charges that are being made as a result of . . . faulty analysis and data,” said George H. Babikian, president of Arco’s refining and marketing division.

“Hold me while I laugh again,” responded Ed Rothschild, director of energy policy for Citizen Action. “Arco’s basically diverting attention from the real issues raised by our study: the sharp increase in metropolitan and state market share by a handful of large companies.”

Arco commissioned its study from a Purdue University economist and is sending it to legislators as a response to the Citizen Action report. The consumer group’s study had generated interest among members of Congress mulling two House bills that would clamp controls on oil company gasoline marketing practices in order to protect independent wholesalers and retailers.

“Congress can’t act in a vacuum,” said an aide to Rep. Ron Wyden (D-Ore.), a sponsor of one of the House bills. “We rely on careful, well-researched information from all sides, and the Citizen Action study has been an important catalyst in moving the debate forward.”

Rothschild has already testified before a House committee on the pending bills, as did S. L. (Stu) McDonald, vice president of distribution for Arco’s refining and marketing company, who spoke on behalf of the oil industry.

Among Arco’s criticisms of the Citizen Action report:

* Despite its argument that oil-company shares of the national and regional refining market have increased, Citizen Action’s own data suggest that those shares have actually decreased or remained constant.

Rothschild said discussion of national shares is irrelevant, and that market share at the local and metropolitan level is a more significant indicator of market control.

* Citizen Action used incorrect data to describe market shares.

Rothschild denied that claim.

* Citizen Action ignored the ease with which firms can enter the gasoline retail market in making its accusation that oil companies were engaged in “predatory pricing” practices aimed at independent gasoline wholesalers and service station operators.

Rothschild questioned Arco’s assumption that it was easy to enter the market.