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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: whitepine who wrote (41657)	4/11/2005 1:18:01 AM
From: energyplay	Read Replies (1) \| Respond to of 206325

You can see various degrees of collusion in the Japanese Keiretsu, and also in the bank centered industrial companies in Germany and Italy. The DeBeers diamond cartel is another well know example, even the Russian diamond miners have found it in their interest to work with DeBeers. For producers of highly fungible (interchangeable) commodities, your competitors may not be your enemies, and your customers are certainly not your friends. The "Silver Users Council", with Eastman Kodak as a key member, was able to persuade the US government to sell the silver stock pile over a period of years, severly depressing the price of silver, and enhancing Kodak's margins.

To: whitepine who wrote (41657)	4/11/2005 1:28:53 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 206325

From my experience, there is a lack of overt competition in many areas of the oil business from a sense of self-interest. Why kick your neighbor in the pants when its so easy for him to do the same to you? 1.) One example occurs when obtaining oil and gas leases. Let's say Chevron is currently sending Landmen to each property owner in a particular area. Most people in the business will know about this within days, if not even before the agents appear in the field. Occasionally a small scrappy company will send out their own leasing agents to the same area, as BHOA did when Chevron was leasing in Beverly Hills. Obtaining, in this case, 23% of the leases the small company will end up sharing perhaps 19% of Chevron's profits. Yet this is very rare. No major oil company will ever do this. Chevron would soon do the same to them - best to keep the peace by keeping competition minimal and courtly. 2.) Major oil companies generally respect each other's marketing territory, although over the past 25 years Exxon has ignored this etiquette in Chevron's territory to a degree which has prompted Chevron's purchases of Gulf Oil, Texaco, and now Unocal. Part of this involves refineries, as they supply the market. Expanding your refinery production beyond your market share is essentially a declaration of war. When Chevron merged with Texaco they sold their small refinery in Bakersfield to Shell to comply with antitrust requirements. Essentially Chevron sold 2% of the California market to Shell. But Shell would much prefer to supply this extra 2% market share from their mega-refinery in the San Francisco Bay Area at Benecia. If Shell closed the Bakersfield refinery and increased the Benecia output by an equal amount, Chevron would have no complaint and no competitive war ensures. As people who have followed the news know already, the State of California objected to this profitable refinery in Bakersfield being shut down when refinery capacity is so tight. This put Shell in a pickle. If they sold the small refinery to another company and also expanded their Benecia output to supply 2% of the California market, they can pretty much guarantee Chevron will do something to make their life unpleasant. Chevron might retaliate by expanding their Richmond or El Segundo output, or worse they might expand their output in the Netherlands and hit Shell's refinery margins in their home market. But generally this doesn't happen and major oil companies respect each other's market share. 3.) Unocal was far ahead of Chevron in geothermal exploration and discovery. A low priority part of one of my jobs at Chevron was to keep track of competitor activity in the geothermal business. An easy way to do this occurred to me. Most of Unocal's wells require a permit from the Forest Service. I suggested to our chief legal counsel that we could easily file a "Freedom of Information Act" with the US Forest Service and obtain all of these permits along with the results from those wells which the Forest Service required. Our counsel agreed so I filed the FOIA request. A week later our legal counsel called me into his office to listen to a call from the chief legal counsel of Unocal who was furious, if not unhinged. When asked if we were going to back down, my counsel suggested to the man from Unocal that "he should go suck an egg." I'd believe in a lot of competition in the oil business were that the end of the story - but it wasn't. We received a call from one of Chevron's Board Members, one of the top three executives in the company. He suggested that in the spirit of cooperation we should withdraw our FOIA request - so we did of course. .