US regulators have stirred tension within the federal government’s relationship with the oil industry, alleging attempted collusion by one of its prominent figures to inflate energy prices.
The Federal Trade Commission (FTC) recently accused Scott Sheffield, former head of Pioneer Natural Resources, of attempting to coordinate production levels with the OPEC cartel. The goal, the FTC asserted, was to bolster Pioneer’s profits “at the expense of US households and businesses.”
This unexpected development, announced concurrently with the FTC’s approval of ExxonMobil’s $60 billion acquisition of Pioneer, has sent shockwaves throughout the industry. Observers speculate on the broader implications of this move and its potential impact before the upcoming presidential election in November.
James Lucier, an analyst at Capital Alpha Partners, noted the significance of the FTC’s shift in approach, stating, “The implications go far beyond Sheffield.” He underscored concerns that CEOs considering mergers may face heightened scrutiny in the future.
Under the leadership of Chair Lina Khan, appointed by President Joe Biden, the FTC has adopted an assertive stance in safeguarding competition and consumer interests. Recent actions include banning employee non-compete agreements and challenging an $8.5 billion luxury goods industry takeover.
As part of its approval of Exxon’s acquisition of Pioneer, the FTC prohibited Sheffield from joining Exxon’s board, a move seen as a direct hit at the influential figure in the US shale energy landscape.
The FTC’s scrutiny focused on Sheffield’s efforts to reduce production during the early stages of the Covid-19 pandemic in 2020, which led to a severe downturn in oil prices. Despite Sheffield’s defense that he was merely raising awareness, the FTC alleged he engaged in efforts to artificially constrain production levels.
Among the evidence cited was a dinner attended by Sheffield and other US producers, hosted by the late OPEC secretary-general Mohammed Barkindo in 2017. Such gatherings have become common within the industry, fostering dialogue and cooperation.
Industry insiders view Sheffield’s situation as a consequence of his outspokenness and a broader FTC initiative targeting the sector. Nevertheless, some experts believe the FTC’s approval of the Exxon-Pioneer deal signals a willingness to support similar mergers.
As the FTC’s actions reverberate throughout the industry, concerns mount over the possibility of a broader inquiry into collusion allegations. Despite uncertainties, experts remain cautiously optimistic about the prospects of future mergers in the oil sector.