The Big Picture on Big Oil is not always crystal clear

PHILADELPHIA -- As consumers struggle to pay off gasoline credit cards and brace for what could be their highest winter heating bills ever, the easiest target for their frustration is Big Oil.

Created by a wave of consolidation after low oil and gas prices in the late 1990s made it hard for independent players to survive, Big Oil today refers to a new class of five ''supermajors," formed out of 11 large oil and natural-gas producers from 1998 to 2001.

Four of the five reported in October a total of $29 billion in third-quarter profits -- 52 percent more than last year. The largest of the group, Exxon Mobil Corp., recorded the biggest quarterly profit ($9.9 billion) and sales ($100.7 billion) of any publicly traded US company ever.

Consolidation has also engulfed the refining sector.

Did the consolidation go too far? Has it reached the point where a handful of giants are able to set prices virtually at will?

Yes, say consumer groups, who have argued for years that the Federal Trade Commission allowed too many mergers. That, they say, gave US companies power to limit supplies, boosting prices overall, and enabled them to take advantage of any glitch in the supply chain to rake in inordinate profits.

''Oil companies are exploiting a tight supply-demand situation," said Tyson Slocum, research director on energy for Public Citizen, a consumer advocacy group in Washington.

Not surprisingly, industry groups have a different view.

''If you had all of this power, then you've been stupid, because you didn't know how to exercise it over the last four to five years," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation in New York.

Instead, Goldstein and other analysts said, what has happened is that the gap between demand and supply has gotten so narrow that supply now is barely able to keep up with demand.

Five years ago, global spare crude-production capacity was more than 5 million barrels per day, giving producers plenty of room to ramp up supplies in a pinch. Surplus capacity is now about 1 million barrels per day, according to the federal Energy Information Administration.

That is a recipe for volatility and rising prices in the global market for crude oil, where traders in New York and London make minute-by-minute guesses about changes in supply and demand.

And as oil prices go, so go gasoline prices.

Also worth noting is that despite the size of their revenues and profits, the Big Five oil companies -- Exxon Mobil Corp., BP PLC, Royal Dutch Shell PLC, Chevron Corp., and Total S.A. -- produce only about 13 percent of the world's crude oil, up from 10 percent a decade ago.

''The price of crude has nothing to do with US mergers," said James Hamilton, an economics professor at the University of California in San Diego, although he said he does worry that consolidation on the refining side of the industry might have gone too far.

Sunoco Inc. and Valero Energy Corp., the two largest independent US refiners, both reported massive third-quarter profits.