Deregulation of oil-related operations has resulted in oil companies entering other markets.
Despite the fact that consumers were the intended beneficiaries of deregulation, there has been general public sentiment against deregulation of the oil and petroleum industries. Unfortunately, to a large extent, consumers have not reaped the economic benefits of increased energy production and energy market cost reductions resulting from deregulation. Nevertheless, deregulation of the oil, gas and energy industries has many economic advantages.
History
Wellhead natural gas prices were regulated as the result of a 1954 court decision. During the administration of President Richard Nixon, oil prices were the subject of wage and price controls in 1971. Congress and President Ronald Reagan lifted domestic oil price controls in 1981 after the enactment of a "windfall profits" tax on domestic oil companies. There had been energy shortages at various times over the next few decades largely as a result of strict regulation of the oil, gas and power generation industries.
Natural gas use declined with the enactment of the Powerplant and Industrial Fuel Use Act of 1978. The Act was repealed by Congress in 1987.
Economics
According to the United States Energy Information Administration (EIA), deregulation should result in additional competition and in more economical use of inventories. Refiners now have more options in dealing with heavy fuel and waste disposal problems. New clean coal technologies used in power generation has begun and the market for low-quality fuels is anticipated to increase with time.
Diversification
Deregulation of oil and the energy markets has resulted in oil companies moving into the power generation industry. Oil refiners have taken advantage of deregulation initially resulting from the enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA). Oil companies that have entered the power generation utility industry include the Royal Dutch Shell Group, Mobil, Exxon, ARCO, Unocal, Amoco and Texaco.
Fuel Efficiency
Before PURPA, there were limited options to refiners to burn fuel and generate electricity. Deregulation has removed many of these limitations. PURPA removed many restrictions and enabled refiners to build units that generate excess energy, assisting in planning for future expansion. This resulted, accordingly, in higher profits, increased supply and consumer power generation prices that are less than what consumers would otherwise have to pay. Gasification options for oil companies operating in utility markets have increased. PURPA has allowed power generators to maximize fuel efficiency.
Generally, fuel costs (representing more than 75 percent of production costs) for fossil fuel generating units have been, and continue to be, targets for improvement of cost efficiency.
