The Federal Trade Commission approved a merger between ExxonMobil and Pioneer Natural Resources last month on the condition that former Pioneer CEO Scott Sheffield be barred from advising the company or serving on the board following the acquisition.
The FTC banned Sheffield after investigators uncovered numerous emails and conversations between the former CEO and oil producers suggesting collusion to artificially raise oil prices by slowing production. In particular, Sheffield allegedly acted unfairly during the COVID-19 pandemic in 2021, when lockdowns resulted in a significant decline in fuel demand.
Economist Phil Verleger, an advisor to several presidential administrations on the oil industry, told The Dallas Express in a telephone interview that some companies, such as airlines, may stand to rake in a lot of money by filing antitrust cases against the oil industry.
“For United Airlines, I did the numbers and they could potentially be looking at more than $1 billion in damages,” Verleger said. “An airline would have to decide that it was worth its while. I suspect the airlines are taking a good, hard look at this. I haven’t looked at American Airlines fuel consumption, but I suspect they would be in a similar situation to United.”
Verleger said that these cases often take years to play out in court and that it could be five or more years before any decision is made. He said the process is in its infancy now, but a treasure trove of communications between Sheffield and other executives raises the likelihood of numerous lawsuits.
If the airlines bring lawsuits, the attorneys will likely file in California, where the Federal District Courts tend to be favorable to litigants in antitrust cases, Verleger said.
The first step in the process would be for the litigants to undergo a class certification process to determine who is eligible to sue, said Verleger. He added that airlines, big trucking companies, and railroads could also get certified. Individuals may also be eligible to join in the suit, as was seen with the Volkswagen class action lawsuit and the Monsanto Roundup case several years ago.
“The FTC concluded that [Sheffield’s communications] were anti-competitive,” Verleger said. “These weren’t emails saying, ‘I hope your family is okay,’ they were worse than that. All we have seen is the documents the FTC has released. We haven’t seen the emails yet.”
Verleger said the FTC’s decision to bar Sheffield indicates the gravity of collusion and antitrust violations allegedly committed.
“Whether there is any showing there was a price effect is months away, maybe years away,” Verleger said. “The FTC is reviewing the merger between Chevron and Hess and they have asked for the same things, so they are going through all the texts and emails that were sent around. They are going to be going through all of the emails that exist to see if there is additional information of this sort. A lot of information is being collected and it is going to be a long process.”
Shareholders with Chevron approved the $53 billion merger on May 28, but the acquisition is on hold over a dispute with ExxonMobil over the rights to assets in Guyana.
“The suggestion in the FTC claim is that Pioneer, by communicating with oil exporting countries and doing domestic talks in forums such as the CERA Conference in Houston, caused oil production to be lower and caused oil prices to be higher than they otherwise would have been,” Verleger said.
Verleger said the possible collusion primarily impacted crude oil prices. The United States produces a great deal of crude oil but is also a major importer. Crude in the United States is considered mainly “sweet” crude, which is low in sulfur, but many of the refineries, such as those along the Gulf Coast in Texas, are designed for refining heavy crude.
Sheffield’s alleged actions purportedly had a trickle-down effect, causing price increases on petroleum products, such as plastics, and potentially higher prices at the pump.
“It is the first time I have ever seen [the FTC] do that in 40 years, so the FTC must have something,” Verleger said. “This played out right in public.”
