US Senate Democrats ask DOJ to investigate oil industry collusion allegations

United States Senate Majority Leader Chuck Schumer and 23 Democratic senators called for the US Justice Department to investigate allegations of collusion by major US oil companies to drive US gasoline prices higher, the latest in a party-wide push to interrogate the industry and elevate the salience of its behavior as a political issue in the months before November's US election.

In a May 30 letter addressed to US Attorney General Merrick Garland and Assistant Attorney General Jonathan Kanter, Schumer and his colleagues appealed for a DOJ probe into potential violations of the Sherman Act, the 1890 antitrust law that prohibits monopolies, basing their concerns on recent Federal Trade Commission allegations that former Pioneer Natural Resources CEO Scott Sheffield attempted to collude with other US oil companies and OPEC to reduce output growth and maintain high prices.

"The federal government must use every tool to prevent and prosecute collusion and price fixing that may have increased gasoline, diesel fuel, heating oil, and jet fuel costs in a way that has materially harmed virtually every American household and business," the letter writes. "We therefore urge the Department of Justice (DOJ) to investigate the oil industry, to hold accountable any liable actors, and to end any illegal activities."

FTC's Pioneer complaint

Allegations of collusion in the oil industry arose from the FTC's May 2 review of ExxonMobil's landmark $64.5 billion acquisition of Pioneer Natural Resources, which Sheffield founded. The FTC allowed Exxon to proceed with the deal provided Sheffield was not named to Exxon's board. Pioneer disputed the complaint's findings but agreed to the condition in order to move the sale forward.

At the center of the FTC's complaint were Sheffield's public and private comments that US oil companies should adopt a uniform approach to 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."

On May 2, ExxonMobil released a statement saying it did not know about Sheffield's actions and that they were "entirely inconsistent with how we do business." Exxon noted its extensive cooperation with the FTC throughout the acquisition.

Sheffield fired back at the FTC May 28, arguing the allegations of collusion created a false narrative that ignored his role in boosting US oil production. Sheffield's attorneys noted that during the relevant time period, Pioneer doubled its production and became the largest producer in the Permian basin.

"While attacking Mr. Sheffield for certain statements, the FTC ignores Mr. Sheffield's role in expanding US oil production over the last few decades and ignores the times when he said that OPEC should increase production, that the oil shale revolution saved the United States and the world from $150 per barrel of oil, and that the Administration should lift restrictions on U.S. drilling activity to allow for increased production," his lawyers said.

In addition to Pioneer's increased production, ExxonMobil and Chevron Permian outputs rose every year from 2020 to 2023. In 2023 the US produced 12.9 million b/d, more than any other nation for the sixth straight year.

Democratic push continues

The Senate Democrats' letter argues that Sheffield's "strategy appears to have to worked."

"From pre-pandemic times to current day, industry collusion may have contributed to the 49% decrease in the US oil production growth rate, the increase of $23.41 in the average crude oil price per barrel, and the $0.94 increase in the average price of retail gasoline," the letter writes. "That means Pioneer's and its co-conspirators' collusion may have cost the average American household up to $500 per car in increased annual fuel costs – an unwelcome tax that is particularly burdensome for lower-income families. Meanwhile, Western oil majors collectively earned more than $300 billion in profits over the last two years, a surge that many market experts believe cannot be explained away by increased production costs from the pandemic or inflation."

This is not Democratic lawmakers' first attempt to tie higher energy prices to potential industry behavior. US Representative Frank Pallone (Democrat-New Jersey), the ranking member on the House Energy & Commerce Committee, wrote to seven major US oil companies May 22 concerned that Sheffield's actions "may represent common practices across the industry." Pallone asked the companies to turn over any communications, meeting schedules, legal guidance or strategies on production plans between any employees of their own companies or those of OPEC and OPEC+.

A day later, 13 Democrats on the House Natural Resource Committee urged Republican committee Chair Bruce Westerman to open its own investigation into the allegations. That letter said the FTC's findings shed different light on Republican criticisms of the US President Joe Biden administration's climate policies, which Republicans have blamed for rising energy costs during his first four years in office.

"The complaint provides evidence for a different explanation that is more consistent with that given by Committee Democrats: Big Oil companies conspired to drive up their own profit at the expense of consumers by colluding with cartels consisting of countries that pose national security threats to the US," they wrote.