US congressional committee to probe whether oil industry colluded to artificially inflate prices

A US congressional committee will investigate whether oil and gas companies colluded to artificially inflate gas prices, US Representative Frank Pallone, the ranking Democrat on the House Energy & Commerce Committee, wrote in letters to seven US oil companies May 22.

The letters -- sent to BP America, Shell USA, Chevron, Occidental Petroleum, Devon Energy, Hess and ExxonMobil -- center on the actions of former Pioneer Natural Resources CEO Scott Sheffield, whom the US Federal Trade Commission barred from joining the board of ExxonMobil after it acquired Pioneer, the US' largest shale producer, in a deal worth $64.5 billion.

The FTC accused Sheffield of colluding with OPEC and its allies in an attempt to "align US oil production with OPEC and OPEC+ country output agreements." Pioneer disputed the FTC's findings but did not protest them, in order to allow the acquisition by ExxonMobil to proceed.

Pallone's investigation will probe whether Sheffield's alleged actions "may represent common practices across the industry," Pallone wrote

"If U.S. oil companies are colluding with each other and foreign cartels to manipulate global oil markets and harm American consumers who then pay more at the pump, Congress and the American people deserve to know," he wrote.

Pallone called for the six non-ExxonMobil companies to turn over any communications, meeting schedules, legal guidance and strategies on production plans between current or former employees, among or within companies, and between employees and representatives of OPEC and OPEC+.

In his letter to ExxonMobil, Pallone also asked for all communications between Pioneer employees who developed production plans or communicated with OPEC. He also demanded details on how former Pioneer employees will be incorporated in ExxonMobil's corporate structure, as well as any guardrails the company plans to erect "to ensure that the alleged behavior by Mr. Sheffield is not replicated within Exxon."

An ExxonMobil spokesperson could not be reached for comment.

"We learned about this investigation from the Federal Trade Commission," ExxonMobil said in a statement May 2. "They are entirely inconsistent with how we do business."

FTC calls Sheffield's actions 'anticompetitive'

In its decision released May 2, the FTC said Sheffield had, through public statements and private communications, "campaigned to organize anticompetitive coordinated output reductions between and among US crude oil producers, and others," including OPEC, in ways that were "designed to pad Pioneer's bottom line ... at the expense of US households and businesses."

The FTC cited text messages, in-person meetings, WhatsApp conversations and public comments Sheffield made that US oil companies should be aligned about capacity growth. "Everybody's going to be disciplined, regardless of whether it's $75 Brent, $80 Brent or $100 Brent," Sheffield said publicly in 2021. "All the shareholders that I've talked to said that if anybody goes back to growth, they will punish those companies."

In 2020, amid the coronavirus pandemic, Sheffield allegedly lobbied the Railroad Commission of Texas to impose output restrictions on Permian Basin oil production.

"If Texas leads the way, maybe we can get OPEC to cut production," Sheffield said. "Maybe Saudi and Russia will follow. That was our plan -- I was using the tactics of OPEC+ to get a bigger OPEC+ done." The commission also noted that Sheffield described himself as having "followed OPEC closer than almost any CEO in the history of our industry."

"This merger would have put an oilman of John Rockefeller's persuasions on the board of a direct successor to Mr. Rockefeller's oil company, which also happens to be the single largest company in the American oil industry," FTC Commissioner Alvaro Bedoya said about ExxonMobil in his concurrence with the FTC's finding.

OPEC's ties with US shale producers -- whose surging output challenged OPEC's attempts to maintain price levels -- were a top priority of previous Secretary General Mohammed Barkindo, who began a regular dinner with American company CEOs in March 2017. The cartel continues to engage with US shale producers, who are not legally permitted to coordinate production decisions.

Chevron and ExxonMobil's outputs from the Permian Basin have risen in each of the past four years. In 2023, the US produced 12.9 million b/d, more than any other nation for the sixth straight year.

Political dynamics

The FTC's finding came amid a lengthy push by Democrats and the administration of President Joe Biden to reorient blame for high gasoline prices in Biden's first term. Biden's FTC chair, Lina Khan, was regarded within legal circles as an especially aggressive appointment; Khan was asked by the White House to lead the effort to monitor the US gasoline market and "address any illegal conduct that might be contributing to price increases for consumers at the pump."

The Biden administration has aggressively waded into oil trading in its own right, selling off 180 million barrels of oil in 2022 in response to spiking prices in the wake of Russia's invasion of Ukraine. It has since refilled many of those barrels at significantly lower prices than the 2022 sale, touting the strategy as a good deal for taxpayers while citing a US Treasury analysis that the SPR release reduced gasoline prices by as much as 40 c/gal.

On May 21, the Department of Energy shuttered the Northeast Gasoline Supply Reserve, as mandated by Congress, with the White House touting its decision to liquidate 1 million barrels of gasoline to help lower pump prices at the start of the summer driving season.

"The Biden-Harris Administration is laser-focused on lowering prices at the pump for American families, especially as drivers hit the road for summer driving season," DOE Secretary Jennifer Granholm said.

Pallone's probe, in focusing on the possibility of collusion among oil companies, will likewise seek to shift the locus of gas costs outside the White House's control as the November US Presidential election draws near. Pallone cannot issue subpoenas on behalf of the committee without the approval of Republican committee Chair Cathy McMorris Rodgers.