Oil Oligopoly

Kinder Morgan Inc. is buying El Paso Corp. for $21.2 billion. This is going to "create the largest natural-gas pipeline network in the U.S."

Now, it seems obvious that the oil industry is an oligopoly, but is that good for the U.S.? Kinder Morgan with all of its new pipeline could claim that it is difficult to get to a certain region and raise the costs an exorbitant amount. Kinder Morgan "will have 80,000 miles of pipeline and an enterprise value of $94 billion" (note: the picture is the current Kinder Morgan pipeline map) and it will become the fourth largest energy company in U.S> (Market Watch). Although, the deal isn't supposed to close until the second quarter so that leaves some time for speculation.

At least in Pennsylvania, competition in the natural gas market doesn't exist (Pittsburgh Post-Gazette) (it also seems that in general, there are hypothesis and legislature for the promotion of competition in the natural gas industry). This deals more with gas to one's home rather than oil for cars, but the idea seems similar. In addition, NaturalGas.org claims that the demand will keep on rising in the future alongside demand for other forms of energy. This increased demand, with low competition makes me a little worried. Will prices be raised to the point where gas is a luxury? Or will that happen and the market will give up on gas altogether?

In the past week, Kinder Morgan's stock price has gone up .15% (it looks way more impressive in graph form) (Daily Finance). In contrast, El Paso's stock has gone up 2.30% over the past week (Daily Finance). Maybe people are buying because they know that Kinder Morgan is going to pay $26.87 per share versus the current $19.59 per share. I think this is interesting because despite all of the interest in alternative energy, most people still expect natural gas to be a prominent energy source, at least for the time being.

What do you think should be done concerning the potential for immense power in gas companies? Should anything be done?

AT&T and the Big Three of Phone Service

I am sure that by now everyone has heard of AT&T's proposed purchase of T-Mobile. Well this is not going down as smoothly as AT&T would have hoped. This is an enormous deal with many implications on the cell-phone service market. If this deal were to go through, AT&T would become the nation's largest service provider, and the three biggest service providers (AT&T, Verizon, and Sprint) would control 90% of the market (sounds like an oligopoly to me).

This is screaming out to the Justice Department because it may give AT&T too much control over other service providers. It would also hurt the consumer because the big three would have much more control over prices (since it is an oligopoly) and it would be safe to assume that they are not going to lower prices. For these reasons the Justice Department is going to look very closely at this deal to make sure it does not hurt the consumer too much. There is absolutely no way that the government will allow this to happen, and I agree completely. There is no way that AT&T's proposed deal will not end up hurting the consumers; AT&T and the other members of the oligopoly would have too much control over prices. Are there any ways this deal could benefit the consumer?