An American oil tycoon is accused of trying to inflate prices

The New York Times

Scott Sheffield, founder and longtime CEO of a leading American oil producer, attempted to collude with OPEC and its allies to inflate prices, federal regulators alleged on Thursday.
Regulators say Sheffield used WhatsApp conversations, in-person meetings and public statements to try to “align oil production” in the Permian Basin in Texas with that of OPEC and OPEC+, the wider group that includes Russia.
Sheffield’s communications were designed to pad Pioneer’s bottom line — as well as those of oil companies in OPEC and OPEC+ member states — at the expense of US households and businesses,” the FTC complaint said.
Unlike with OPEC nations, US oil production is supposed to be decided by the free market, not by coordination among the major players.
Sheffield retired in December 2023 as CEO of Pioneer.
“American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook.” The FTC alleges that Sheffield “campaigned to organize anticompetitive coordinated output reductions” between and among US oil producers and OPEC and OPEC+.
That was our plan.” Sheffield added, according to regulators: “I was using the tactics of OPEC+ to get a bigger OPEC+ done.” Global oil prices plunged by about 50% in early 2020 as pandemic lockdowns decimated demand for gas and aviation fuel.
Exxon said that in response to the FTC’s concerns, it will not add Sheffield to its board.

NEUTRAL

Federal regulators claimed on Thursday that Scott Sheffield, the founder and longtime CEO of a major American oil producer, tried to conspire with OPEC and its allies to inflate prices.

Sheffield, who was Pioneer Natural Resources’ CEO at the time, allegedly had hundreds of text messages with officials of the Organization of the Petroleum Exporting Countries, or OPEC, an oil cartel headed by Saudi Arabia, about pricing, production, and the dynamics of the oil market. This information was disclosed by the Federal Trade Commission.

Officials claim that Sheffield attempted to “align oil production” in the Texas Permian Basin with that of OPEC and OPEC+, the larger organization that includes Russia, through public remarks, in-person meetings, and WhatsApp exchanges.

“Mr. The FTC complaint claimed that Sheffield’s communications were intended to benefit oil companies in OPEC and OPEC+ member states, as well as Pioneer, at the expense of US consumers and businesses.

In contrast to OPEC member countries, US oil production is expected to be determined by the free market rather than by major players working together.

December 2023 saw Sheffield’s retirement from Pioneer as CEO. With the help of the abundant Permian oil field, which has helped the US become the world’s top producer of gas and oil, his company is the largest producer in the region.

On Thursday, the FTC approved the $60 billion sale of Pioneer to ExxonMobil, provided that Sheffield would not be allowed to advise or sit on the company’s board of directors.

“Mr. In a statement, Kyle Mach, deputy director of the FTC’s Bureau of Competition, stated that Sheffield’s prior behavior “makes it crystal clear that he should be nowhere near Exxon’s boardroom.”. “U.S. customers shouldn’t have to pay exorbitant gas prices just to line the coffers of a corporate executive.”. “.

Sheffield “campaigned to organize anticompetitive coordinated output reductions” between and among US oil producers and OPEC and OPEC+, according to the FTC.

A representative for the FTC, Douglas Farrar, told CNN in response to rumors that the agency was thinking of suggesting Sheffield be charged with a crime: “The FTC has a responsibility to refer potentially criminal behavior and takes that obligation very seriously.”. “.

Authorities noted that Sheffield made public remarks encouraging US competitors to be “disciplined” about production, indicating that he did not conceal his attempts to “align” US production with that of OPEC.

The FTC said, “But Mr. Sheffield did not limit himself to public signaling to US counterparts — he has also held repeated, private conversations with high-ranking OPEC representatives assuring them that Pioneer and its Permian Basin rivals were working hard to keep oil output artificially low.”.

employing OPEC’s strategies.

Sheffield, according to the FTC, pushed the Railroad Commission of Texas to impose output restrictions on Permian oil production at the beginning of the 2020 Covid pandemic. The commission claimed that these cuts would have driven up crude oil prices above market levels.

Additionally, the FTC reported that the Pioneer CEO stated, “If Texas leads the way, maybe we can get OPEC to cut production,” during Sheffield’s discussion with other Texas producers about efforts to coordinate output. Perhaps Russia and Saudi Arabia will come next. That was our strategy. “.

As per regulatory sources, Sheffield went on to say, “I was using OPEC+ tactics to get a bigger OPEC+ done.”. “.

Early in 2020, the demand for gas and aviation fuel was severely reduced by pandemic lockdowns, resulting in a roughly 50% decline in global oil prices. In response, OPEC+ reduced output.

In a statement, Pioneer stood up for Sheffield and claimed that his communications had “neither the intent nor the effect of circumventing the laws and principles protecting market competition.”. “.

“We disagree and find the FTC’s complaint surprising,” Pioneer stated in its statement. “Mr. Sheffield and Pioneer contend that the FTC’s complaint misrepresents the character and intent of Mr. Sheffield’s actions and reflects a basic misunderstanding of the US and international oil markets. “.

However, Pioneer and Sheffield gave notice that they would not be contesting the FTC’s conclusions, stating that they “are not taking any steps to prevent the merger from closing.”. “.

In a statement, Exxon stated that the FTC had informed it of the claims.

“They are totally at odds with the way we conduct business,” Exxon declared, adding that after providing the FTC with more than 111 million documents, the authorities expressed “no concerns about our business practices.”.

In response to the FTC’s concerns, Exxon announced that Sheffield will not be joining its board. According to the company, the acquisition of Pioneer is expected to close on Friday.

More information has been added to this story.

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