Last week, Exxon Mobil agreed to buy Pioneer Natural Resources for $59.5 billion, in a move widely expected to set off a wave of consolidation throughout the oil sector. Combined, Exxon and Pioneer would be the largest producer of oil and natural gas in the Permian Basin, the field that produces more than 40 percent of America’s oil. If the deal goes through, other companies like Chevron could soon follow suit, buying up smaller companies as they come under pressure from investors to match Exxon’s size.
That consolidation would undermine democracy in the United States, mislead investors and weaken market competition. It should be stopped for all our sakes.
The democratic argument against the proposed deal is simple. In politics, concentrated interests, like rich corporations, have powerful advantages over diffuse interests, like voters, that can distort outcomes and thwart progress. Take climate legislation. A majority of Americans want to see the environment protected, but big companies that pollute heavily have an interest in watering down legislation that might reduce their profits. As a result, progress on energy policy has been agonizingly slow.
Exxon has also taken steps to shape the way voters think about the environment by sowing public misinformation and funding conservative groups disguised as grass-roots organizations. For instance, in July 1977, Exxon’s own senior scientist James Black told senior management that fossil fuels were causing climate change. Publicly, however, Exxon painted a very different picture. Lee Raymond, Exxon’s chief executive from 1993 to 2005, reportedly announced at a shareholders’ meeting, “I’m not convinced that the earth is warming at all.” In 2006, Exxon finally publicly acknowledged climate change risk for the first time, but as recently as 2016, according to a Wall Street Journal article published last month, it was still supporting “research that questioned the findings of mainstream climate science.”
Allowing Big Oil to become Bigger Oil means more money for this kind of research, plus more money for lobbyists, industry interest groups and media advertising, all of which undermines efforts to pass legislation strong enough to meet the world’s climate goals. The cumulative effect of it all on democracy would be so significant that regulators ought to be paying close attention.
A second reason for concern is the yawning gap between what Exxon says to investors and what it actually does. The company said as recently as August that it continues to support the Paris climate agreement. But it also said that the world isn’t on track to reach the targets of the agreement. The Pioneer deal not only seems to be a huge bet to take advantage of that expected failure; it is also a commitment to contribute to the failure. By doubling down on its oil and gas strategy rather than investing in low-carbon technologies, Exxon is actively undermining the agreement that it claims to support.
Authorities should also be concerned because the proposed deal could hurt Americans economically. Larger, consolidated oil companies have incentives to restrain production, restricting supply to artificially sustain high prices. Higher oil prices would mean higher gasoline prices at the pump — a classic antitrust concern. Perhaps even more significant, Exxon’s purchase of Pioneer could give it market power to hurt workers and small companies in Texas’ oil sector by driving down wages and weakening safety standards.
Even with these clear democratic and economic concerns, the legal path to blocking the deal could be difficult. In recent decades, the courts have not taken kindly to antitrust cases rooted in environmental or democratic arguments. But there are, nonetheless, a number of avenues open to regulators.
Under Lina Khan’s leadership, the Federal Trade Commission has taken a more aggressive approach to considering how market domination by individual companies hurts American society. She could, if she so chose, begin an investigation into Exxon’s proposed acquisition — and eventually bring it to court. Her legal team could make a case built around the potential harm the deal would do to competition in the oil market. But even if that case failed, the mere fact that the government was willing to open a serious investigation into Exxon’s deal with Pioneer could discourage some of the other mergers and acquisitions that are now widely expected throughout the oil industry.
The Federal Trade Commission should not be alone in this fight. The Securities and Exchange Commission should consider whether Exxon has misled its investors with regard to climate change. And Congress could also hold hearings on the proposed deal. If legislators want to build the political momentum required to enact the policies the United States needs to cut its emissions meaningfully, then it will be essential to expose the oil companies’ lack of credibility on this issue and to curtail their overwhelming political influence.
It didn’t have to be this way. If Exxon were serious about preventing climate change, it could use its record $56 billion in net income from last year to invest more seriously in renewable energy, carbon capture and storage or other technologies that are compatible with long-term environmental sustainability. The Federal Trade Commission would surely allow Exxon to acquire a major solar company, for instance.
There’s nothing wrong with wanting to turn a greater profit, but there are more ways than one for a company as large and powerful as Exxon to do so. By doubling down on fossil fuels, it’s choosing the way most harmful to the rest of us. Now it falls to the government to protect its people from corporate self-interest that’s detrimental to democracy and the global environment. This deal endangers the world, and it should be stopped.
Jeff D. Colgan is a professor of political science and the director of the Climate Solutions Lab at Brown University.
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