Schumer, Senate Democrats Target ‘Big Oil’ CEOs One More Time

Senate Majority Leader Chuck Schumer asked the justice department last week to investigate big oil companies over allegations of price fixing and collusion. Schumer was joined by 22 Democratic senators in a letter making the demands, which stem in part from allegations levelled by FTC Chair Lina Khan last month at former Pioneer Natural Resources CEO Scott Sheffield.

In an editorial headlined “Hang the Oil and Gas CEOs,” the Wall Street Journal editorial board says Schumer’s letter contains “no evidence of wrongdoing, let alone criminal acts, other than the FTC’s dubious allegations,” adding that “Democrats need an inflation scapegoat heading into the November election.” Indeed, leveling accusations of collusion and price fixing and calling oil company CEOs to Capitol Hill for hearings has been a routine used by congressional Democrats during election years since the Jimmy Carter presidency, a fact I’ve written about here in the past. It is important to note that none of those previous efforts have uncovered a single instance in which allegations of collusion and price-fixing proved accurate.

In issuing the FTC’s final sign-off on ExxonMobil’s buyout of Pioneer, the Commission claimed to have uncovered “troubling evidence” Sheffield had engaged in collusion not just with fellow oil company CEOs but also the OPEC+ cartel during the COVID pandemic of 2020 to restrain production in order to raise oil prices. The FTC also points to an effort by Sheffield and others to convince the Texas Railroad Commission to invoke a procedure called “prorationing” in Texas to help restore oil prices after the price for West Texas Intermediate had actually dropped below zero on May 29 that year.

In a letter sent to Khan and other FTC commissioners last week, Sheffield strongly denies any wrongdoing, refuting the allegations point-by-point. In light of his letter, the FTC’s claims appear to amount to a smear based on suspicions and not much else.

The allegation related to the prorationing question is especially bizarre, given that it is nothing more than a conservation tool designed to prevent waste of valuable mineral resources. It was first invoked by the RRC in the early 1930s, when the discovery of the giant East Texas Field flooded oil markets, causing prices to drop to less than 2 cents per barrel. A brief history of the RRC published at the agency’s website says, “By limiting production in East Texas and elsewhere, commissioners succeeded both in supporting oil prices and in conserving the state's resources.”