Lessons From AT&T: Should Big Oil Get Scared?
- Feb 5, 2013 9:15 pm GMT
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When’s the last time you made a long-distance phone call? Do you even notice the difference between local and long-distance charges? Before 1984, only AT&T could sell long-distance telephone service, making a long-distance call to your great aunt cost $3.00 a minute. That monopoly and unfair pricing ended when a federal judge required AT&T to grant access to any carrier that wanted to sell long-distance services. Within three years, the price of a long-distance call decreased from the staggering $3.00 a minute to 30 cents a minute. Today it’s a mere 3 cents a minute, thanks to competition and an open market.
Without the breakup of that monopoly, which brought forth industry competition and consumer choice, we wouldn’t be enjoying rapid advancements in the communication industry, the great and powerful iPhone and the ability to watch, listen, play, tweet and stream from one device.
Here’s a lesson from Economics 101: a monopoly has the power to set the price on a commodity. Although there is more than one oil company (Shell, Exxon, BP etc.), the only fuel they sell to consumers is gasoline. The lack of fuel competition allows “big oil” to set the price. The wide-scale adoption of abundant, domestic fuel supplies (natural gas, methanol, ethanol and electricity) will boost competition and innovation (which we so desperately need), resulting in a wider fuel selection for consumers and lower prices at the pump. This is not to mention protection against resource and price volatility and improved air quality. A transition of this magnitude does not happen on its own. Businesses must invest in innovative ideas; policies must evolve to accommodate a changing world; and organizations must unite to educate, inform and involve the public.
Beneficiaries of an oil-addicted population and economy, or, as many call it, an oil monopoly, will do everything in their power to maintain a situation where they have sole custody over the transportation fuel market. Recent actions from the American Petroleum Institute (API) demonstrate this exact notion. Group Downstream director, Bob Greco, announced that API is “strongly considering” asking the U.S. Supreme Court to hear a case regarding the sale of a high-ethanol fuel blend. Soon after, a press conference ignited news headlines with something along the lines of, “Ethanol destroys cars.” The claims that warn of the dangers of ethanol are based off a research study funded by – you guessed it – the API and automakers. This is yet another representation of API’s attempt to reverse rules and court decisions that are vital to free markets and competition.
Clearly, API is threatened by the “competition” and has good reason to be! The competition – natural gas, methanol and, in this case, ethanol, or any combination of replacement fuels, could cause the oil industry to lose profits, market shares and eventually, their dominant control over the fuel/energy market.
Moreover, the oil industry’s recent investments and interest in natural gas is no coincidence. Natural gas is abundant in America and has the potential to become a dominant transportation fuel. If that is going to be the case, API wants a piece of the pie.
The breakup of AT&T brought forth a new era of technology – multi-functioning phones and affordable long-distance phone calls. Breaking the oil monopoly would give us far more than that – relief at the pump and a thriving future for years to come.