Courtney Sacco, The Odessa American/AP Photo
Pioneer Natural Resources CEO Scott Sheffield in 2014
For the past four years, the main area of inflation that has frustrated Americans the most is gas prices. The numbers have come down since their 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) was choosing not to ramp up production and instead constrain capacity.
The Federal Trade Commission recently uncovered another underlying cause: an orchestrated plot between OPEC and an American fracking tycoon to exploit the inflationary period to push prices even higher. That was arguably even more critical to the overall price-fixing scheme, because the U.S., since the fracking boom of the mid-2010s, is the largest oil producer on Earth, and the “swing” producer with the greatest ability to move prices.
This scheme cost the average American as much as $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 in Texas and Washington to amass serious influence on oil and gas policy, until now.
The FTC made its discovery while reviewing a merger between Pioneer and global oil giant ExxonMobil, a deal which the commission announced it would clear last week. But as a condition for letting the merger go through, the FTC is barring Sheffield from joining the board of the combined firm, 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, specifically related to slashing production and pricing. Much of the FTC documents are redacted, but in a notable exchange the commission provided, Sheffield said: “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.”
His target was explicitly $200 a barrel; OPEC delivered on the agreement and prices soared, though never quite to that target level.
OPEC is an organized cartel of Middle Eastern countries and Russia that basks in the legal immunity that a network of U.S. companies would not be granted. The alliance manages production in total coordination with one another and often uses its power to exploit global conditions. For example, OPEC has often slashed production when demand is lower to maintain the same prices and profit levels. What’s become more common in recent years though is U.S. oil barons getting in on the action by working in conjunction with their supposed competitors in the Middle East.
The excess profits accrued by the industry from 2021 to 2022 reached a record high of $205 billion, which might have cost every American consumer $2,100.
Sheffield’s price-fixing scheme was the latest example of that trend. His contribution to the effects of gas price inflation in the U.S. potentially accounted for upwards of 27 percent of price increases in 2022, according to the newsletter BIG by Matt Stoller of the American Economic Liberties Project. The excess profits accrued by the industry from 2021 to 2022 reached a record high of $205 billion, which might have cost every American consumer $2,100.
Along with blocking Sheffield from sitting on Exxon’s board or in its executive suite, the FTC could still push for a criminal case against him for collusion, as Semafor reported. That would be in line with one of the first policies FTC chair Lina Khan put in place when she took over to expand the commission’s criminal referral program to more forcefully prosecute corporate crime.
“The FTC has a responsibility to refer potentially criminal behavior and take that obligation very seriously,” said Douglas Farrar, spokesperson for the FTC.
More important, Sheffield was singled out before his peers, an embarrassment that others don’t want to face. Since the FTC’s announcement last week, pandemonium has ensued within the industry world for regulators’ audacity to sanction one of their own.
SHEFFIELD IS AN ICONIC FIGURE IN THE OIL BUSINESS who helped jump-start the shale revolution in the U.S. over the past decade, bringing the industry new windfalls and the promise of energy independence.
He’s also been a major heavyweight in Washington for the oil and gas industry across Democratic and Republican administrations. Though mostly a GOP mega-donor, it should come as no surprise that Sheffield has financed the political careers of Big Oil’s most loyal foot soldiers in Congress regardless of party, from Republican Sens. 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 bribes from an Azerbaijani state-owned oil company.
Since 2006, Sheffield has personally contributed over $281,000 to House, Senate, presidential, and joint fundraising committee campaigns along with nearly $200,000 to PACs that has been disclosed, according to a compilation of documents from the Federal Election Commission. Pioneer employees and the company’s political action committee have separately donated $1.2 million to campaigns since 2012.
With political clout, 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 accomplishment came in 2014, when he just about single-handedly managed to lobby congressional approval to lift a long-standing ban on U.S. crude oil exports.
The ban had been in place for national-security purposes to ensure that the country would have enough domestic supply if geopolitical tensions erupted in the Middle East, like during the 1970s oil crisis. But the ban got in the way of booming U.S. oil production during the shale revolution, and was keeping 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.
Especially in his company’s home state of Texas, Sheffield is a political fundraising rainmaker, having delivered $290,000 to various elected officials in the state since 2005. He’s focused his attention in particular on buying up elected officials who sit on the state railroad commission, which oversees oil and gas. Next to federal regulators and the Saudi crown price, the commission is the most influential petroleum regulatory body in the world, setting policy for the largest site of U.S. energy production.
After 2020, Sheffield’s agenda became very specifically to scale back U.S. production and squeeze what might be the last golden years out of the business after peak oil. Having observed and dealt with OPEC since its founding in the 1970s, Sheffield became envious of its ability to collude, a luxury not provided to U.S. oil producers. He effectively went about trying to recreate the arrangement by pulling every possible political lever at his disposal.
When the pandemic hit, Sheffield used his connections to get a rule proposed in front of the Texas railroad commission that would have instituted quotas on production in the state. Despite his best efforts, the rule faced enormous opposition from most of the oil and gas producers, including Exxon, which were mostly skittish about a dramatic government intervention not seen since the 1970s.
When that plan failed, Sheffield then personally lobbied President Trump to use his leverage with OPEC to get them to pull back production and limit global supply. President Trump obliged, and OPEC did constrain supply, though to a lesser extent than Sheffield had hoped, as Texas Monthly reported.
That set the table for Sheffield’s ambitions once the industry roared back to life after the pandemic. As the Prospect reported, with demand for oil and gas sky-high, Sheffield and his fellow frackers saw an opportunity to slow-walk production back to life to capitalize on the high prices and extract massive profits that had been lost in 2020.
Indeed, Pioneer posted its highest profits in a decade in 2021. Even in the middle of that, Sheffield said on a public earnings call in February 2022 that production would not expand.
“There’s no change for us,” he told investors. “$100 oil, $150 oil, we’re not going to change our growth rate.”
