The mega-donor who confronted OPEC

Over the past four years, the main area of ​​inflation that has frustrated Americans the most is gas prices. The numbers have declined since the peak in 2022, but still remain stubbornly high.

At first, much of the volatility was thought to be related to global disruptions from Russia’s war in Ukraine. But any outside observer could also see that the Organization of the Petroleum Exporting Countries (OPEC, led by our supposed ally Saudi Arabia) has chosen not to ramp up production and instead limit capacity.

The Federal Trade Commission recently uncovered another root cause: an orchestrated plot between OPEC and an American fracking magnate to exploit the inflationary period to push prices even higher. This was perhaps even more critical to the overall price-fixing scheme because the US, since the fracking boom of the mid-2010s, has been the largest oil producer on Earth and the “swing” producer with the greatest ability to move prices.

This scheme has cost the average American up to $2,100 a year, according to one estimate. The orchestrator, CEO of Texas oil and gas powerhouse Pioneer Natural Resources, Scott Sheffield, has used campaign contributions from Texas and Washington to amass serious influence on oil and gas policy, so far.

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The FTC made its discovery while examining a merger between Pioneer and global oil giant ExxonMobil, a deal the commission announced it would close last week. But as a condition of allowing the merger, the FTC bars Sheffield from joining the combined company’s board because of evidence it obtained that Sheffield colluded with OPEC at the height of inflation to fix prices.

Between 2021 and 2022, Sheffield exchanged hundreds of texts, WhatsApp messages and in-person communications with OPEC leaders to coordinate market dynamics, particularly related to production and price cuts. Many of the FTC documents are redacted, but in a notable exchange provided by the commission, Sheffield said: “If Texas leads, maybe we can get OPEC to cut production. Perhaps Saudi Arabia and Russia will follow. That was our plan… We were using the OPEC+ tactic to achieve a bigger OPEC+.”

His target was explicitly $200 per barrel; OPEC stuck to the deal and prices rose, though never to that target level.

OPEC is an organized cartel of Middle Eastern countries and Russia that enjoys legal immunity that would not be granted to a network of American companies. The alliance manages production in full coordination with each other and often uses its power to exploit global conditions. For example, OPEC has often cut production when demand is lower in order to maintain the same prices and profit levels. What has become more common in recent years, however, is for American oil barons to get in on the action by working with their alleged Middle Eastern competitors.

The excess profits accumulated by the industry from 2021 to 2022 reached a record $205 billion, which could have cost each American consumer $2,100.

The Sheffield price-fixing scheme was the latest example of this trend. Its contribution to the effects of U.S. gas price inflation potentially accounted for more than 27 percent of price increases in 2022, according to BIG newsletter by Matt Stoller of the American Economic Liberties Project. The excess profits accumulated by the industry from 2021 to 2022 reached a record $205 billion, which could have cost each American consumer $2,100.

In addition to barring Sheffield from Exxon’s board or his executive suite, the FTC could still pursue a criminal case against him for collusion because Traffic light reported. That would be consistent with one of the first policies FTC Chairman Lina Khan put in place when she took office to expand the commission’s criminal referral program to more forcefully pursue corporate crime.

“The FTC has a responsibility to report potentially criminal conduct and takes that duty very seriously,” said Douglas Farrar, a spokesman for the FTC.

More importantly, Sheffield has been singled out in front of his peers, an embarrassment others don’t want to face. Since the FTC’s announcement last week, there has been pandemonium in the industry world over regulators’ audacity to sanction one of their own.

SHEFFIELD IS AN ICONIC FIGURE IN THE OIL BUSINESS which helped start the shale revolution in the US over the past decade, bringing the industry new advantages and the promise of energy independence.

He has also been a major Washington heavyweight for the oil and gas industry in both Democratic and Republican administrations. While mostly a GOP mega-donor, it should come as no surprise that Sheffield has bankrolled the political careers of Big Oil’s most loyal foot soldiers in Congress, regardless of party, from Republican Senators Ted Cruz ( R-TX) and Lisa Murkowski (R). -AK) to Democrats like Sen. Joe Manchin (D-WV) and Rep. Henry Cuellar (D-TX), who was recently indicted for taking a bribe from an Azerbaijani state oil company.

Since 2006, Sheffield has personally contributed more than $281,000 to House, Senate, presidential and joint fundraising committee campaigns, along with nearly $200,000 to PACs that have been disclosed, according to a compilation of documents by at the Federal Electoral Commission. Pioneer employees and the company’s political action committee separately donated $1.2 million to the 2012 campaigns.

Politically influential, Sheffield secured favorable regulatory and tax treatment for fossil fuels and opposed climate change policies such as the cap-and-trade bill in 2010. But perhaps his greatest political achievement occurred in 2014, when he almost single-handedly lobbied Congress for approval to lift a long-standing ban on US crude oil exports.

The ban had been in place for national security purposes to ensure that the country would have sufficient domestic supplies if geopolitical tensions erupted in the Middle East, as during the oil crisis of the 1970s. But the ban prevented US oil production from rising during shale revolution and kept consumer prices lower than they might be if producers could spread that demand globally. So Sheffield went to work and got a repeal of the ban passed through Congress and signed by Barack Obama.

Particularly in his company’s home state of Texas, Sheffield is a political fundraiser, having delivered $290,000 to various state elected officials since 2005. He has focused his attention on buying elected officials who part of the state railroad commission, which supervises. oil and gas. Besides federal regulators and the price of the Saudi crown, the commission is the world’s most influential oil regulator, setting policy for the largest U.S. energy production site.

After 2020, Sheffield’s agenda has become very specific to cut US output and squeeze out what could be the last golden years of the business after peak oil. Having observed and dealt with OPEC since its inception in the 1970s, Sheffield grew envious of its ability to collaborate, a luxury not afforded to US oil producers. He effectively tried to recreate the arrangement by pulling all the possible political levers at his disposal.

When the pandemic hit, Sheffield used his connections to get a proposed rule before the Texas railroad commission that would have instituted production quotas in the state. Despite his efforts, the rule faced enormous opposition from most oil and gas producers, including Exxon, who were largely upset about a dramatic government intervention not seen since the 1970s.

When that plan failed, Sheffield personally lobbied President Trump to use his leverage with OPEC to get them to cut production and limit global supply. President Trump obliged, and OPEC constrained supply, though to a lesser extent than Sheffield had hoped because Texas Monthly reported.

That set the stage for Sheffield’s ambitions once the industry bounced back to life after the pandemic. As the Prospect reportedwith demand for oil and gas skyrocketing, Sheffield and his peers saw an opportunity to slow production back to life to capitalize on high prices and reap massive profits that were lost in 2020.

Indeed, Pioneer posted it the biggest profits in a decade in 2021. Even in the midst of this, Sheffield said on a public earnings call in February 2022 that production would not expand.

“There is no change for us,” he told investors. “$100 oil, $150 oil, we’re not going to change our growth rate.”