Senator Wyden Calls for FTC Investigation into Canadian Oil Companies' Potential Price Manipulation

Strategic Insights -

U.S. Senator Ron Wyden has requested an investigation by the Federal Trade Commission into seven Canadian oil companies for allegedly colluding to manipulate oil prices and drive up costs for U.S. consumers. The issue centers around the proposed Keystone XL pipeline, which would allow Canadian oil companies to bypass Midwest refineries and send their crude to Gulf Coast refineries, potentially increasing prices for gasoline consumers. The letter sent to FTC Chairman Jonathan Leibowitz highlights testimony from TransCanada that the pipeline can add up to $4 billion to U.S. fuel costs.

Key Takeaways:

  • Senator Ron Wyden has called for an FTC investigation into seven Canadian oil companies for potential price manipulation and anti-competitive practices.
  • The issue centers around the proposed Keystone XL pipeline, which would allow Canadian oil companies to bypass Midwest refineries and send their crude to Gulf Coast refineries.
  • The letter highlights testimony from TransCanada that the pipeline can add up to $4 billion to U.S. fuel costs.
  • The proposed pipeline would also likely encourage the export of crude oil derived from tar sands from North America.
  • Significant investments have been made in Canadian production by foreign firms, including China National Petroleum Corporation.
  • The scheme could result in higher per barrel costs in the Midwest, with increases of $3.00 per barrel overall and $6.55 per barrel sold in Midwest markets.
  • The potential increase in prices could increase revenue for the Canadian producing industry by $2-3.9 billion per year.
  • The Canadian oil companies appear to cooperate to use the new pipeline capacity to expand tar sands operations in Canada and then transfer some of the flows to the Gulf Coast.

Statistics:

  • Up to $4 billion: The potential increase in U.S. fuel costs due to the Keystone XL pipeline.
  • $3.00 per barrel: The potential increase in costs from the pipeline in the Midwest.
  • $6.55 per barrel sold in Midwest markets: The potential increase in costs from the pipeline in the Midwest.
  • $2-3.9 billion per year: The potential increase in revenue for the Canadian producing industry.
  • 380,000 barrels per day: The total of committed barrels represented by seven shippers.
  • 7 shippers: The number of oil companies allegedly pursuing the strategy to increase prices.

Sources:

  • Senator Ron Wyden's letter to FTC Chairman Jonathan Leibowitz, available online.
  • TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application, Section 3: Supply and Markets.
  • Canadian National Energy Board, Hearing OH-1-2009, TransCanada Keystone Pipeline GP Ltd., Keystone XL Pipeline Project, Transcript Volume 3 (September 17, 2009).
  • Western Canadian Crude Supply and Markets, prepared by T. Wise for TransCanada Keystone Pipeline GP Ltd. (February 12, 2009).
  • U.S. Federal Energy Regulatory Commission, 125 FERC s 61,025, Docket No. OR08-9-000 (October 8, 2008).
  • Canadian National Energy Board, Order MO-13-2009, (September 14, 2009).