senate budget committee
Key Senate Panel Launches Probe of Big Oil-OPEC Collusion
Illegal coordination between oil companies and OPEC may have cost U.S. families thousands of dollars in higher costs for gas and other necessities.
Announcing a probe into potential efforts by fossil fuel companies to illegally coordinate with international oil producers in order to fix prices, U.S. Sen. Sheldon Whitehouse on Wednesday wrote to 18 oil giants demanding that they turn over communications with the Organization of Petroleum Exporting Countries, commonly known as OPEC.
Whitehouse (D-R.I.) wrote to companies including ExxonMobil, Chevron, and ConocoPhillips in his capacity as chairman of the Senate Budget Committee, weeks after the Federal Trade Commission (FTC) accused the former CEO of Pioneer Natural Resources Company of attempting to collude with OPEC.
Text messages, WhatsApp communications, and records from in-person meetings showed that Scott Sheffield tried to collude with representatives of OPEC countries to manipulate oil and gas production worldwide and raise oil and gas prices.
The commission made its discovery while reviewing a plan by ExxonMobil to acquire Pioneer in a $64.5 billion deal.
"The FTC's findings indicate that Sheffield and Pioneer may not have been the only individual or entity engaging in such collusive activities," wrote Whitehouse to the 18 oil giants, citing numerous examples.
"We're talking $500-1000 dollars of extra cost per year to Americans through direct and indirect effects of this conspiracy."
"In view of the findings against Sheffield, I seek to understand whether other oil producers operating in the United States may also have been coordinating with OPEC and OPEC+ representatives concerning oil production output, crude oil prices, and the relationship between the production and pricing of oil products," said Whitehouse.
Whitehouse called on the companies to provide communications between and among companies' corporate and affiliate officers and members of the OPEC Secretariat and OPEC+ concerning oil production output, crude oil prices, and the relationship between the production and pricing of oil products, dating from January 1, 2020 through the present.
The companies have until July 12 to provide the materials, the senator said.
Whitehouse noted that efforts by Sheffield and, potentially, other oil executives, to illegally coordinate oil production and prices with OPEC, may have had major, tangible effects on American families. He cited an analysis by the American Economic Liberties Project which found that "crude oil price-fixing schemes may have caused over 25% of the increase in inflation that hurt so many American families throughout 2021 in the wake of the Covid-19 pandemic."
"Since the U.S. consumes 7 billion barrels of oil annually, the amount saved by shale oil drillers during their price war with OPEC was $140 billion to $210 billion a year," wrote Matt Stoller, the group's research director.
"Once that price war ended, presumably so did the savings," Stoller continued. "The cost itself is likely a lot higher because pulling shale off the market when demand spiked probably caused prices to increase by much more than $20-30 a barrel. Anyway, we're talking $500-1000 dollars of extra cost per year to Americans through direct and indirect effects of this conspiracy. This cost shows up most obviously in the form of more expensive gas, but higher oil prices increase the price of everything right down to potato chips because of gas being a primary cost in distribution of goods and services. For a family of four, that's two to four thousand dollars a year in higher costs."
Whitehouse wrote in his letter to the oil company that he was "concerned about the possibility that oil and gas companies could be engaging in collusive, anti-competitive activities with OPEC+ that would raise crude oil prices, resulting in higher costs not only for American families, but also for the U.S. government when it acquires crude oil for the Strategic Petroleum Reserve."
'We Should All Be Angry' That Corporations Spent Trump Tax Windfall on Buybacks: Expert
"Corporations took their tax windfalls and spent a trillion dollars of it in 2018 on stock buybacks instead of on worker wages or innovation," said Sarah Anderson of the Institute for Policy Studies.
An economic policy expert told the Senate Budget Committee on Wednesday that Americans should be outraged that large corporations funneled their massive gains from the 2017 Trump-GOP tax law into stock buybacks, further enriching executives and wealthy shareholders while skimping on worker pay.
"Whether you were for or against the 2017 tax cuts, I think we should all be angry that corporations took their tax windfalls and spent a trillion dollars of it in 2018 on stock buybacks instead of on worker wages or innovation," Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, said during a Senate Budget Committee hearing titled, "Making Wall Street Pay Its Fair Share: Raising Revenue, Strengthening Our Economy."
Watch Anderson's testimony:
The Institute on Taxation and Economic Policy (ITEP) noted in an analysis earlier this year that during the first four years after former President Donald Trump's tax cuts took effect, the country's largest corporations collectively spent $2.72 trillion repurchasing their own shares—more than they spent "on investments in plants, equipment, or software that might have created new jobs and grown the economy."
In written testimony submitted to the Senate Budget Committee for Wednesday's hearing, Anderson pointed to data from the Congressional Research Service showing that U.S. corporations spent $1 trillion total on stock buybacks during the first year of the Tax Cuts and Jobs Act, which took effect in 2018. That year, U.S. billionaires paid a lower effective tax rate than working-class Americans for the first time in the country's history.
"S&P 500 firms alone spent $806 billion [on buybacks], a massive jump from the $519 billion they spent repurchasing stock in 2017," Anderson wrote. "Spending tax-cut windfalls and other profits on stock buybacks siphons resources from worker wages, R&D, and other productive investments that stimulate long-term growth. Analysts have documented the association between buybacks and worker layoffs, as well as reduced capital investment and innovation and wage stagnation."
In a Wednesday op-ed forCommon Dreams, Labor Institute executive director Les Leopold pointed out that John Deere, for example, has spent $12.2 billion on stock buybacks over the last two years alone while simultaneously slashing hundreds of jobs and offshoring production.
Leopold blasted the practice as "a blatant form of stock manipulation that was illegal until deregulated by the Reagan administration."
"For too long, Wall Street lobbyists have wielded excessive power to shape our tax code."
Wednesday's hearing was held following fresh reports that congressional Republicans are gearing up to slash taxes for the rich and large corporations even further if they seize control of the Senate in November and Trump—the presumptive GOP presidential nominee—wins another four years in the White House.
Anderson urged senators to use the looming expiration of some provisions of the 2017 tax law as an opportunity for reforms that target corporations that pay their CEOs excessively, tax Wall Street speculation, and discourage stock buybacks. In her written testimony, Anderson noted that increasing the 1% excise tax on corporate stock buybacks to 4% would generate $238 billion in new federal revenue over the next decade.
"For too long, Wall Street lobbyists have wielded excessive power to shape our tax code in ways that allow this lucrative sector to pay far less than their fair share of all the public services and infrastructure necessary for a healthy economy," Anderson wrote. "Continuing the status quo—or returning to the pre-2017 tax code—will not be acceptable if we are to meet the public investment needs of our time and reverse our country's staggering economic and racial disparities."
Big Oil Needs to Be Held Accountable for Its Climate Deception
Ultimately, the future of accountability for the fossil fuel industry is up to us.
Oil companies knew since the 1950s that their product was causing catastrophic climate damage. The industry never supported the goals of the Paris Climate Agreement, despite their many public statements to the contrary. Companies like BP and Shell understood the dangers of methane emissions from ‘natural’ gas, but marketed it as a clean energy solution anyways. Over the last decade, the industry has spent over $700 million on university research to promote a lasting role for fossil fuels in our energy future. ExxonMobil’s security chief is “tracking” climate activists’ whereabouts, while the American Petroleum Institute monitors their social media feeds.
Those are just some of the revelations from a 65-page report released by the Senate Budget committee ahead of a hearing on Wednesday into Big Oil disinformation. The report is the culmination of a three-year investigation into the industry’s “denial, disinformation, and doublespeak,” an inquiry which the industry tried to stymie at nearly every turn, withholding information, resisting subpoenas, and then swamping the committee with over 100,000 pages of meaningless documents.
Despite the industry’s efforts, the report is a damning portrayal of Big Oil’s decades-long crusade to simultaneously block meaningful climate action while extracting more government support for false solutions like ‘natural’ gas (aka methane) and carbon capture and sequestration. Over the course of thousands of emails, top executives, lobbyists, and PR advisors debate how to lobby against important regulations, greenwash the industry’s reputation, shape university research agendas, and mislead the public about the threat of fossil fuels.
The fossil fuel industry isn’t going to give it up willingly. Which means that the next phase of the effort to hold Big Oil accountable is going to have to pursue the industry with sharper teeth.
And that’s all from the content they were willing to share, which begs the question: what did they decide to redact? If these are the documents the industry felt best represent their harmless day-to-day operations, what sorts of bombshells are they covering up? The committee’s report reads like the flickering of a flashlight in a dark basement, giving us a snapshot of the subterranean world of Big Oil deception, while raising the question, what else hides in these dark corners?
Whatever it is, the fossil fuel industry isn’t going to give it up willingly. Which means that the next phase of the effort to hold Big Oil accountable is going to have to pursue the industry with sharper teeth.
At the federal level, that means getting the Department of Justice to launch an investigation into Big Oil disinformation. Twenty members of Congress have already sent a letter to DOJ urging such an investigation and after this week’s hearing and report, pressure will only grow. What’s needed now is for President Biden and the White House to throw their weight behind the idea. Congress can also pay their part by pursuing a more aggressive “make polluters pay” agenda, taking up bills like a windfall profits tax, which would go after Big Oil profiteering, and the Polluter Pays Climate Fund, which would make the industry pay their fair share to deal with climate damages.
At the city and state level, we need to see more lawsuits to prosecute the industry for climate damages and disinformation. Over 30 cities and states have already filed suit, but with thousands of communities already paying the costs of extreme weather, sea level rise and other climate impacts, we could see hundreds of new cases in the years to come. Lawsuits aren’t the only tool at our disposal: five states are now pursuing “climate superfund” bills that would make Big Oil pay for climate impacts by contributing to a fund based on their share of historic emissions. Vermont could pass its version as early as this summer.
Ultimately, the future of Big Oil accountability is up to us. The fossil fuel industry has spent billions on its efforts to lull us to sleep with fairy tales about ‘algae fuels’ or ‘natural’ gas. This week’s hearing was another wake up call to the reality of their deception and lies. Let’s not let it go to waste.