Editorial: Win friends, influence markets

June 4, 2024
The US FTC banned Pioneer Natural Resources CEO from serving on ExxonMobil's board or advising the company as a condition of approving the merger of the two.

The US Federal Trade Commission (FTC) on May 2 banned Pioneer Natural Resources Co. chief executive officer Scott Sheffield from serving on ExxonMobil Corp.’s board or advising the company as a condition of approving the $64.5-billion merger of the two. FTC took the step to “prevent Sheffield from engaging in collusive activity that would potentially raise crude oil prices, leading American consumers and businesses to pay higher prices for gasoline, diesel fuel, heating oil and jet fuel.”

A couple of months before the FTC’s action, a bipartisan group of Senate Judiciary Committee members had reintroduced legislation “to improve fairness and stability in the global oil market” by allowing the federal government to take action against price fixing by the Organization of Petroleum Exporting Countries (OPEC). Mike Lee (R-Utah), one of the bill’s sponsors, trumpeted: “No one is above the law. Yet, OPEC continues to demonstrate its willingness to engage in illegal, anticompetitive, and extortionary means to enrich its members at the expense of consumers,” adding that the legislation sends “a clear message to the oil cartel that its days of illegally pricing and distributing petroleum products are numbered.” 

We might be about to find out if the same righteous zeal will be applied when the fix comes from other US citizens, especially those in a position to be of material assistance. Since 2006 Sheffield has personally contributed hundreds of thousands of dollars to various political campaigns and hundreds of thousands more to political action committees.

The FTC alleged that Sheffield attempted to collude with OPEC representatives to constrain oil and gas production to inflate profits for his company. “Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom,” said Kyle Mach, Deputy Director of the FTC’s Bureau of Competition.

The antitrust regulator also claimed Sheffield was working to coordinate with the Texas Railroad Commission to cap Texas production. “If Texas leads the way, maybe we can get OPEC to cut production. Maybe Saudi and Russia will follow. That was our plan,” FTC cited him as saying.

The day after the FTC’s ban of Sheffield, the Department of Justice unsealed an indictment against Congressman Henry Cuellar (D-Tex.) charging him with accepting $600,000 from Azerbaijan’s state oil company and a Mexican bank in exchange for official acts as a member of congress.

The cycle of life

US-based major oil and gas companies’ annual net incomes routinely land in the tens of billions of dollars. There’s no dishonor (much less crime) in that and the benefits of hosting a plethora of such giant, healthy businesses are manifold and reverberate beyond the oil and gas industry through the economy as a whole.

At the same time, US taxpayers subsidize the industry to the tune of billions of dollars per year. Not as many billions. But enough that the White House’s 2024 budget proposal estimated that subsidy repeals could increase tax receipts by an average of more than $3 billion/year over the course of the next 10 years.

And now, serious allegations emerge of collusion—both corporate and political—with overseas entities; all while engaged in nonstop caterwauling about how the current administration is attempting to kill the industry outright through its polices and both causing higher prices and threatening US “energy independence” in doing so.

Whether a person or a company, all you can do is control your own behavior. The industry has made great strides towards improving safety over the past 20 or so years. It’s time it applies the same diligence to how it positions itself as a corporate citizen. Or at least stops complaining about how unjustified its reputation is.