The Federal Trade Commission (FTC) has approved Exxon Mobil’s $64.5 billion acquisition of oil producer Pioneer Natural Resources, but only after imposing extraordinary conditions to block the company’s billionaire founder, Scott Sheffield, from being hired or holding any position within the oil giant.

According to a shocking FTC complaint published this week, Sheffield, who founded Pioneer in 1997 and served as CEO until late 2023, repeatedly attempted to collude with officials from the powerful Organization of the Petroleum Exporting Countries (OPEC) oil cartel to arrange production cuts that sought to inflate crude prices at the expense of American consumers and businesses for profit.

The FTC order prohibits Exxon from appointing Sheffield to its board or letting him serve in an advisory role after the acquisition is completed, citing his alleged past conduct behavior as justification for this decision.

“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom,” warned FTC Bureau of Competition Deputy Director Kyle Mach. “American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook.”

FTC Presents Shocking Allegations of Backroom Dealings with OPEC

At the core of the FTC’s case are allegations that the 71-year-old tycoon engaged in a “longrunning strategy to coordinate output reductions” through private communications and backroom dealings with high-ranking officials from OPEC.

This included hundreds of text messages with OPEC representatives discussing “crude oil market dynamics, pricing, and output” as well as in-person meetings, WhatsApp conversations, and other efforts to discuss strategies regarding production cuts in relationship with the cartel.

As the FTC describes it, Sheffield was obsessed with trying to align US shale output – particularly in the oil-rich Permian Basin of Texas and New Mexico where Pioneer operated as the largest producer – with the strict production quotas imposed by OPEC and allied petro-states like Russia.

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The ultimate goal of these clandestine efforts, according to regulators, was reaping the financial rewards resulting from creating an artificial supply shortage to inflate oil prices through collusive production cuts by US firms and the cartel.

“Mr. 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 reads.

These kinds of collusion and price-fixing strategies are becoming more and more common as business titans get together to enrich themselves, no matter the cost to the American people.

Sheffield Threatened to Punish ‘Growth’ and Discipline Rivals

While the FTC is lifting the veil on Sheffield’s private communications and dealings, it notes that his publicly stated mission to boost profits by reducing supply levels was hardly subtle.

In media interviews, earnings calls, and industry events, the outspoken titan of the oil industry issued stern warnings that any rival who increased production would be punished for their actions and that everyone should be “disciplined” about their approach to oil production.

“Everybody’s going to be disciplined, regardless of whether it’s $75 Brent, $80 Brent, or $100 Brent,” Sheffield declared in 2021, referring to global oil price benchmarks. “All the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies.”

It is unclear who Sheffield is referring to as “they”, but the frightening tone of the message was surely enough to deter some players in the oil sector from pumping crude at maximum capacity. This is because significantly increased production would lead to lower prices, causing profit margins for every oil producer to drop. If they all work together to keep supply low, everyone wins (except for the consumer, of course).

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The FTC alleges that these discussions were far more than just tough talk. The complaint cites comments from Sheffield openly advocating for the Texas energy regulator, the Railroad Commission, to mandate statewide output cuts. Something that would be considered an outrageous call for government intervention to boost prices, again, at a tremendous cost to consumers.

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

Funnily enough, OPEC does pretty much exactly the same things as Sheffield was doing but on a global scale. It is literally a cartel that works to keep oil prices high for the sake of profits but it’s an organization of sovereign countries instead of companies.

DOJ May Open a Criminal Investigation into Sheffield’s Actions

While the FTC was clearly troubled enough by the allegations to impose a board ban and conditions on the Exxon-Pioneer acquisition to resolve antitrust concerns, its actions may only mark the beginning of its move against Sheffield.

The Wall Street Journal reported that the agency has decided to refer the allegations to the Department of Justice (DOJ) for potential criminal prosecution, citing sources familiar with the matter.

Charges for collusion with OPEC to manipulate global oil markets and enrich both US producers and members of the foreign cartel would dramatically escalate the case against Sheffield – potentially making him a prime target in the Biden administration’s criticism of energy companies’ profits amid high fuel prices.

“The FTC has a responsibility to refer potentially criminal behavior and takes that obligation very seriously,” an FTC spokesman told multiple media outlets about the possibility of criminal charges.

For its part, Pioneer has pushed back forcefully, blasting the FTC’s complaint as “a fundamental misunderstanding of the US and global oil markets” that “misreads the nature and intent of Mr. Sheffield’s actions.”

However, it did not reject the conditions imposed by the FTC for the acquisition to go through, stating: “Notwithstanding, Pioneer and Mr. Sheffield are not taking any steps to prevent the merger from closing.”

Exxon Distances Itself from Pioneer Founder’s Conduct

By absorbing Pioneer’s prime Permian properties, Exxon is cementing its dominance of the prolific oilfield, nearly doubling its footprint in the area overnight. However, Sheffield’s tainted presence threatened to undermine those valuable assets from the start.

In its statement following the FTC order, the oil major attempted to distance itself from the FTC’s claims by saying that the allegations about Sheffield’s behavior were “entirely inconsistent with how we [Exxon] do business” based on the 1.1 million documents it provided regulators.

Exxon reassured regulators that it will fully comply with the FTC order and not appoint Sheffield to any role within its company once the acquisition closes, which is expected to happen this Friday according to the company.

Instead, it will add current Pioneer board member Maria Dreyfus to its own board – scrapping initial plans to bring the company’s billionaire founder into the Exxon boardroom.

While Exxon claims that it had no prior knowledge of Sheffield’s collusive activities, the FTC clearly believes that his installation at the heart of the newly combined oil behemoth would greatly increase “the likelihood of coordination” and “make existing coordination more effective.”

Simply put, regulators are worried that Sheffield’s presence as an insider at Exxon could allow him to continue his crusade to boost profits through collusive alignment with OPEC (and it’s easy to see why).

Is the FTC Signaling its Intention to Reshape the American Oil Industry with This Ban?

The FTC has been extraordinarily active recently to fight against anticompetitive and illegal business practices after decades of Reagan era impotence, potentially because the 2024 presidential election is looming. It recently agreed to ban most noncompete agreements, helping millions of Americans get better jobs and start their own businesses.

federal trade commission rages war against oil titan colluding to boost oil prices

The FTC’s decision to move against Sheffield and block his influence in the oil industry by banning the mogul from attaining a board seat within Exxon sends a clear signal of how regulatory agencies are conducting their affairs lately.

By claiming the head of a top representative from the shale oil industry in exchange for letting a huge acquisition pass, regulators are drawing a bright line in the proverbial sand: Domestic companies will not be permitted to coordinate production levels with OPEC or its allied petro-states to manipulate global markets and inflate prices (at least when it’s this blatant).

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Moreover, the battle-ready posture adopted by the regulatory agency toward the Exxon-Pioneer merger signals that its newest leadership is determined to scrutinize oil industry consolidation moves with an unprecedented focus on protecting consumers from excessive prices at the pump.

Could Scott Sheffield ultimately face criminal charges for his alleged backroom dealings? Will the government take an even harder line against energy incumbents that have booked record profits as inflation rages?

By taking this assertive role in the Exxon-Pioneer deal, regulators are putting the entire industry on notice that collusive practices to pad profits at the public’s expense will no longer be tolerated.