Price-fixing conspiracy in US oil industry cost families money, reports allege

A costumer pumps gas at a gas station in Mundelein, Ill., Thursday, Feb. 8, 2024. (AP Photo/Nam Y. Huh)

By Sophie Boudreau

May 17, 2024

In conjunction with evidence from the Federal Trade Commission (FTC), new reporting points to a broad price-fixing and collusion conspiracy within the oil industry—one that had a far-reaching impact on general post-Covid inflation in 2021 and cost everyday American families thousands of dollars.

In an early May edition of his BIG Newsletter, reporter Matt Stoller pointed to a Kansas City-based class action complaint, along with newly released FTC reports, as evidence that American shale oil companies colluded with the Saudi government to engage in price-fixing.

Stoller theorized that American shale oil producers grew tired of price competition with the Organization of the Petroleum Exporting Countries (OPEC) oil cartel and decided to shirk the issue by simply joining the cartel themselves. As a result, Stoller wrote, oil prices rose—costing consumers a collective $200 billion annually.

Allegations against oil exec support collusion claims

Earlier this month, the FTC published supporting evidence for such a conspiracy by accusing former Pioneer Natural Resources CEO Scott Sheffield of directly colluding with OPEC and its affiliated OPEC+.

OPEC is an international cooperative organization of leading oil-producing countries, including Saudi Arabia, Iran, and Iraq. The group was formed in 1960 with the stated goal of maximizing industry profits and influencing the global oil market. The US is not part of OPEC or OPEC+.

FTC officials say Sheffield deliberately encouraged OPEC to reduce output of oil and gas, thus lowering supply and forcing consumers to pay more for gas—a move that would ultimately boost profits for Pioneer.

In its report, the FTC asserted that “through public statements, text messages, in-person meetings, WhatsApp conversations and other communications while at Pioneer, Sheffield sought to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+.”

The report shows that Sheffield was relatively open about his goals.

In one message to Texas oil producers, Sheffield wrote, “If Texas leads the way, maybe we can get OPEC to cut production. Maybe Saudi and Russia will follow. That was our plan. I was using the tactics of OPEC+ to get a bigger OPEC+ done.”

And while the FTC still cleared a deal earlier this month allowing oil giant Exxon Mobil to acquire Pioneer Natural Resources for $65 billion, Sheffield and any other Pioneer “employees or directors” were banned from serving on the Exxon board of directors.

Just this week, FTC Chair Lina Khan addressed price-fixing and Sheffield’s actions in an appearance before the House Appropriations Committee. During the hearing, Congressman Mark Pocan (D-Wis.) applauded the FTC’s actions regarding Sheffield and suggested that criminal charges should be considered against the former CEO.

“I would recommend Orange Is the New Black, if we need to, to make a point,” Pocan said, referencing the Netflix series based in a prison. “It would be helpful because we’re feeling it at the pumps and clearly this kind of behavior, we know, isn’t isolated.”

Later, Pocan took to X (formerly Twitter), adding, “I think jail time should be necessary.”

During her testimony, Khan said she believes “price-fixing and output reduction in a coordinated way can be criminal violations of the antitrust laws. As enforcers, we can’t specifically speak to what we’re referring and what we’re not, but as a general matter, it’s been a priority of mine to make sure we are referring more criminal candidates to the Justice Department.”

Oil price-fixing affects broader inflation

During the height of price competition between OPEC and American shale oil drillers between 2014-2016, Stoller reported, the US economy saved some $140-$210 billion per year. When US shale oil companies engaged in price-fixing with OPEC, cost per barrel skyrocketed—ultimately creating “$500-1000 dollars of extra cost per year to Americans through direct and indirect effects of this conspiracy,” Stoller wrote.

Beyond the cost of gas, higher oil prices are correlated with higher inflation in general. Because much of the American economy relies on gas to transport goods and provide services, inflated gas prices lead to inflated product and service prices across the board.

Some economists say that corporate profits were behind the majority of America’s increased inflation in 2021, which reached a 40-year high that year. With the nation’s top 25 gas and oil companies raking in a whopping $205 billion during 2021, it’s safe to say they too experienced massive corporate profits.

“Now we can see that it’s price-fixing in the specific sector of oil companies that kept prices high,” Stoller wrote, referencing the US shale oil market and its alleged dealings with OPEC.

Meanwhile, the Wall Street Journal reported that the FTC has forwarded its collusion complaint to the Justice Department to explore potential criminal charges against Sheffield and Pioneer.

And just this week, plaintiffs in a Nevada-based antitrust class action lawsuit alleging that oil companies conspired to drive up consumer costs by limiting supply demanded access to Pioneer’s records regarding Sheffield. It’s not yet clear whether record access will be granted.

“There’s no way to make Americans whole for what oil executives did, but there needs to be a real penalty for schemes of this magnitude,” Stoller wrote. “Will that happen? I doubt it. But it should.”

Sheffield, Big Oil linked to conservative groups

The FTC’s collusion allegations come as Sheffield has also been linked to Project 2025, an ultra-right “blueprint” for policy under a potential second Donald Trump presidential term.

A press release from Accountable.us, an advocacy group focused on holding special interests accountable, says Sheffield and another Pioneer executive have donated nearly $8,000 to Western Energy Alliance’s Political Action Committee since 2011. The oil and gas section of Project 2025, which prioritizes oil company profits and deregulation over consumer costs and environmental concerns, was authored by Western Energy Alliance’s Kathleen Sgamma.

A closer look at Sheffield’s own donations reveals that the embattled CEO has personally spent upwards of $750,000 in an effort to shape oil and gas policy. A report from the Revolving Door Project shows that since 2000, Sheffield has given more than $480,000 to fundraising committee campaigns and PACs at both the state and federal level, 94% of which went to Republican, conservative, or corporate PACs.

In Texas alone, Sheffield has contributed a whopping $290,000. This includes upwards of $120,000 in donations to ensure that the Texas Railroad Commission, which wields massive influence as a leading gas, oil, and mining regulator in Texas, remains under the control of Republican leaders.

Trump’s cozy ties to Big Oil

Trump himself also recently vowed to reverse Biden-era environmental regulations in exchange for $1 billion in financial donations from oil companies.

Sources told the Washington Post that Trump asked executives from Chevron, ConocoPhillips, Exxon Mobil, and Continental Resources to support his reelection campaign during a dinner at his Palm Beach, Florida home earlier this month.

And while campaign finance experts have said Trump’s dinnertime request is likely legal, the former president could be liable for breaking a campaign finance rule against soliciting more than the federal limit in campaign contributions from individual donors.

“To the extent that there is this suggestion that these executives raise $1 billion on Trump’s behalf, that would potentially violate federal law,” Erin Chlopak, senior campaign finance director at Campaign Legal Center, told Politico. “A billion dollars is far above the limits. A candidate can’t make that request.”

Author

  • Sophie Boudreau

    Sophie Boudreau is a writer and editor with nearly a decade of experience covering lifestyle, culture, and political topics. She previously served as senior editor at eHow and produced Michigan and Detroit content for Only In Your State.

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