Study Of The Monopoly Of The Oil Industry And Its Legal Regulation

The oil industry is closely related to national security and the people' s everydaylife. So all countries take a certain degree of state control. Specifically China's oilindustry is administrative: As regulatory body, the Ministry of Commerce and theNational Reform and Develop Commission are not only policy-makers but alsopolicy-implementers; as managers, Petro China and SinopecCorp are not onlyengaged in business affairs but also have certain privileges. In addition, the marketis still divided geographically and the rules are mainly established byadministrative polities and documents rather than law. On the other hand,Anti-monopoly Law, which deters the enterprises from monopolizing, doesn'texist in our country at present. So it is necessary to reform the oil industry, tostrengthen regulation and to improve the legislation.This paper mainly discussed about four matters in different parts:The first part gives an overview of the oligopoly in oil industry. Since 1998,three large companies (Sinopec, Petro China and CNOOC) oligopolize in China.Specifically speaking, Sinopec and PetroChina control the north and south ofYellow River separately. This is caused by the economic system as well asadministrative factors.PartⅡdiscusses about the necessity of applying anti-monopoly rules to oilindustry. As proved in this article, oligopoly of oil industry is the combination ofnatural monopoly and administrative monopoly. Based on the recent NaturalMonopoly Theory and the Public Interest Theory, state's monopoly of the oilindustry is not fully justified. Thus Anti-monopoly Law is needed to keep highefficiency and to improve public interests.PartⅢlists the behavior of abusing dominant position. Under the legislationmodel of "Behaviorism ", Anti-monopoly Law focuses on market behavior ratherthan market structure. At present, excessive pricing, refusal to deal and pricediscrimination are three common abusive behaviors likely to appear in oil industry.Case law is implemented to forbid them in both Europe Commission and theUnited States. Also these conducts are definitely prohibited by the draft ofAnti-monopoly Law in our country.PartⅣanalyzes the harm of the oil oligopoly and puts forwards some countermeasures. Oligopoly of the oil industry led to low economical efficiencyand the loss of public welfare. It is necessary to take the following steps: First, laydown anti-trust law and trade legislation. The second is to break the geographicdivision so as to create a competitive market structure. The third is to separate theaffairs of natural monopoly from those of non-natural monopoly. Fourth, improvethe pricing mechanism of refined oil. Fifth, set up independent and professionalregulatory organization, including Anti-monopoly Commission and industrialregulatory agency.