05.30.24

Alleged Oil Industry Price-Fixing Caught on WhatsApp: Cantwell & Schumer Call For Investigation

WA gas prices more than doubled from May 2020 -June 2022, within the timeframe of the alleged collusion; Cantwell legislation directs the FTC to proactively monitor markets for fraud or manipulation that may be artificially inflating pump prices

WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) joined Senate Majority Leader Chuck Schumer (D-NY) in urging U.S. Attorney General Merrick Garland to open a criminal investigation into the oil industry in light of disturbing new evidence of possible price fixing by a top oil executive -- actions that may have cost the average Washington driver an estimated $500 more at the pump each year.

A Federal Trade Commission (FTC) review of the proposed $60 billion blockbuster merger between oil giants ExxonMobil and Pioneer Natural Resources uncovered private WhatsApp messages and other public and private statements suggesting that the founder and former CEO of Pioneer Natural Resources may have colluded with OPEC officials and U.S. petroleum producers to, as the FTC stated, “reduce output of oil and gas, which would result in Americans paying higher prices at the pump, to inflate profits for his company.”

“These reports are alarming and lend credence to the fear that corporate avarice is keeping prices artificially high. This is also a national-security concern: this alleged collusion with OPEC may have served to enrich countries like Iran and Russia that are actively seeking to undermine the United States and our allies. 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,” Senators Cantwell and Schumer wrote in a letter to Garland and Assistant Attorney General, Antitrust Division, Jonathan Kanter. 

The FTC uncovered correspondence between Scott Sheffield, the founder and former CEO of Pioneer Natural Resources, and OPEC officials which stretched back to beginning of the COVID pandemic – when gas prices in Washington state hovered around or below $3 per gallon. By June 2022, the average price of a gallon of gas in Washington state had reached $5.44/gallon – more than double the May 2020 price of  $2.36/gallon. According to AAA, today’s average price for regular gasoline across Washington state remains high at $4.54 per gallon. In response, the FTC proposed a consent order banning Sheffield and other Pioneer employees from serving on Exxon’s board of directors or serving in an advisory capacity at Exxon after the acquisition is final.

“Meanwhile,” the Senators write, “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.” 

Sen. Cantwell has long championed legislation to protect consumers, hold bad actors accountable, and increase transparency in oil and gas markets.  

In May 2022, Sen. Cantwell, chair of the Senate Committee on Commerce, Science, and Technology, introduced the Transportation Fuel Market Transparency Act, which would significantly increase transportation fuel market transparency and direct the FTC to proactively monitor and prevent any fraud or manipulation that may be artificially inflating pump prices.

On April 5, 2022, Sen. Cantwell chaired a Senate Commerce Committee hearing that revealed a lack of oversight and visibility into petroleum trades that affect prices at the gas pump. The committee heard from energy expert Robert McCullough, who testified that benchmark indices used to price petroleum contracts across the West Coast market are based on transactions that are not on an exchange, not public, and not well understood.  

In the aftermath of Enron’s energy trading schemes, Sen. Cantwell authored an amendment to the Energy Policy Act of 2005 that strengthened the Federal Energy Regulatory Commission’s (FERC) authority to investigate and punish market manipulation in the electricity and natural gas markets.  

Since then, FERC has built a permanent cadre of internal energy experts that continually monitor and investigate anomalous market trends and suspicious behavior. These policemen on the beat have uncovered numerous exploitive schemes, to date approving more than 150 settlement agreements, assessing over $870 million in civil penalties, and disgorging over $630 million in illegal profits.

In the wake of the 2008 Financial Crisis, Sen. Cantwell authored legislation that gave the Commodity Futures Trading Commission (CFTC) similar anti-market manipulation authority and responsibilities in financially-settled energy commodity derivatives markets. Over the last decade, the Commission has used its anti-fraud and anti-market manipulation authority to prosecute more than 50 actions which have collectively imposed more than $4.5 billion in monetary relief.

A Sen. Cantwell addition to the 2007 Energy Bill gave the FTC virtually identical anti-market manipulation authority and responsibility to the Federal Trade Commission to oversee wholesale crude oil and petroleum markets. However, unlike FERC and the CFTC – which together have used their authority to assess more than $5.8 billion in monetary relief, civil penalties, and disgorgement of illegal profits – the FTC has only used its authority sparingly. As described above, the Transportation Fuel Market Transparency Act would significantly enhance the 2007 authority and establish a new unit within the Commission dedicated to overseeing transportation fuel markets, as well as direct the Energy Information Administration to collect the market data necessary to effectively monitor and police markets. 

The letter was signed by 23 Democratic senators. Full text of the letter is available HERE.