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Scott Sheffield, founder and longtime CEO of a number one American oil producer, tried to collude with OPEC and its allies to inflate costs, federal regulators alleged on Thursday.
The Federal Commerce Fee mentioned Sheffield, then CEO of Pioneer Pure Sources, exchanged hundreds of text messages discussing pricing, manufacturing and oil market dynamics with officers on the Group of the Petroleum Exporting International locations, or OPEC, the oil cartel led by Saudi Arabia.
Regulators say Sheffield used WhatsApp conversations, in-person conferences and public statements to attempt to “align oil manufacturing” within the Permian Basin in Texas with that of OPEC and OPEC+, the broader group that features Russia.
“Mr. Sheffield’s communications had been designed to pad Pioneer’s backside line — in addition to these of oil corporations in OPEC and OPEC+ member states — on the expense of US households and companies,” the FTC grievance mentioned.
In contrast to with OPEC nations, US oil manufacturing is meant to be determined by the free market, not by coordination among the many main gamers.
Sheffield retired in December 2023 as CEO of Pioneer. The corporate he based is the largest producer within the Permian Basin, the plentiful oil area that has helped make the US the world’s prime producer of oil and fuel.
The FTC gave the inexperienced mild on Thursday for Pioneer to be sold to ExxonMobil for $60 billion — however solely below an settlement that stops Sheffield from sitting on Exxon’s board or serving as an adviser.
“Mr. Sheffield’s previous conduct makes it crystal clear that he must be nowhere close to Exxon’s boardroom,” Kyle Mach, deputy director of the FTC’s Bureau of Competitors, mentioned in an announcement. “American customers shouldn’t pay unfair costs on the pump merely to pad a company government’s pocketbook.”
The FTC alleges that Sheffield “campaigned to arrange anticompetitive coordinated output reductions” between and amongst US oil producers and OPEC and OPEC+.
Requested about stories that the FTC was contemplating recommending Sheffield face legal prices, FTC spokesperson Douglas Farrar advised CNN: “The FTC has a accountability to refer probably legal conduct and takes that obligation very severely.”
Regulators acknowledged that Sheffield didn’t disguise his efforts to “align” US manufacturing with that of OPEC, pointing to public feedback he made urging US rivals to be “disciplined” about manufacturing.
“However Mr. Sheffield didn’t restrict himself to public signaling to US counterparts — he has additionally held repeated, non-public conversations with high-ranking OPEC representatives assuring them that Pioneer and its Permian Basin rivals had been working exhausting to maintain oil output artificially low,” the FTC mentioned.
The FTC mentioned Sheffield lobbied the Railroad Fee of Texas on the outset of the Covid pandemic in 2020 to impose output restrictions on Permian oil manufacturing, cuts that it mentioned would have elevated crude oil costs above market ranges.
The FTC additionally mentioned that whereas Sheffield was discussing efforts to coordinate output with different Texas producers, the Pioneer CEO mentioned: “If Texas leads the best way, possibly we will get OPEC to chop manufacturing. Perhaps Saudi Arabia and Russia will observe. That was our plan.”
Sheffield added, in response to regulators: “I used to be utilizing the techniques of OPEC+ to get an even bigger OPEC+ achieved.”
International oil costs plunged by about 50% in early 2020 as pandemic lockdowns decimated demand for fuel and aviation gasoline. OPEC+ responded by slashing production.
Pioneer launched an announcement defending Sheffield and arguing it was “neither the intent nor an impact of his communications to avoid the legal guidelines and rules defending market competitors.”
“We disagree and are stunned by the FTC’s grievance,” Pioneer mentioned within the assertion. “Mr. Sheffield and Pioneer consider that the FTC’s grievance displays a elementary misunderstanding of the US and world oil markets and misreads the character and intent of Mr. Sheffield’s actions.”
However Pioneer and Sheffield signaled they received’t combat the FTC’s findings, saying they “are usually not taking any steps to forestall the merger from closing.”
Exxon mentioned in an announcement that it had realized in regards to the allegations from the FTC.
“They’re solely inconsistent with how we do enterprise,” Exxon mentioned, noting that officers raised “no considerations with our enterprise practices” after the corporate submitted greater than 1.1 million paperwork in response to the FTC’s requests.
Exxon mentioned that in response to the FTC’s considerations, it is not going to add Sheffield to its board. The corporate mentioned it expects the deal to amass Pioneer will shut on Friday.
This story has been up to date with further data.