Biden administration blunders again with Opec collusion allegations

Reuters/Daniel Kramer

What Scott Sheffield doesn’t know about the oil business isn’t worth knowing.

After a successful early career in the industry, Sheffield founded Pioneer Natural Resources in 1997. It grew to become the leader in the US shale industry, cracking (literally) the challenge of the oil-rich rock of the Permian Basin in West Texas and New Mexico.

Sheffield was the real pioneer of the dynamic fusion of capital and technology that in the early 2000s set the US on the road to being the world’s No 1 oil producer, deploying the best hydrocarbon technology and becoming self-sufficient in energy.

---

---

It’s a fair guess that he knows more about oil than Lina Khan. She is a legal academic born in London who moved to the US as a child and has risen to become an associate professor of law at Columbia University in New York and, crucially, President Joe Biden’s choice as chair of the Federal Trade Commission.

In a recent ruling, the FTC has in effect banned Sheffield from involvement in the biggest oil deal of the 21st century – the $60 billion merger between Pioneer and ExxonMobil. The deal could go ahead, the commission ruled, but Sheffield could not sit on the enlarged board.

This is just the latest example of the Biden administration’s wildly inconsistent attitude towards the hydrocarbon business.

While reaping the economic and strategic benefits of its standing as the world’s No 1 oil producer, the US regularly acts to the detriment of the industry. 

This comes via restrictions on natural gas exports, bans on pipelines and other crucial oil infrastructure, or the encouragement of ludicrous environmental, social and governance rules that for a while stymied investment in oil.

The latest move against Sheffield shows a degree of vindictiveness and ignorance of the global oil market that is stunning, even by the standards of the current White House’s thinking on energy.

The FTC has alleged that Sheffield colluded with Opec, the oil producers’ alliance in which the UAE and Saudi Arabia play leading roles, to drive up oil prices to the disadvantage of American businesses and consumers.

This sinister behaviour supposedly took place in April 2020, as the world was grappling with the repercussions of the Covid-19 pandemic.

It is worth bearing in mind market conditions back then. Much of the world’s industry and transport had shut down and oil demand had fallen off a cliff – as much as 30 percent down.

The crude oil price collapsed, with West Texas Intermediate (the US benchmark) selling at minus $37 dollars a barrel. Producers such as Pioneer and Exxon were paying customers to take the stuff away from their refineries and storage tanks.

In this unprecedented market chaos, Sheffield and other leaders of the oil industry realised the glut had to be staunched. They got together in a historic collaboration that involved Opec and Opec+, the G20, the International Energy Agency and leading oil producers, both independent and nationally owned.

To suggest that Sheffield’s role amounts to anti-consumer collusion is a misreading of the historical facts

Even the then President Donald Trump got involved, claiming credit for convening a series of meetings that eventually took something like 20 million barrels per day of supply off the global market. Maybe add the charge of collusion to his long list of legal cases? 

The bitter medicine, the biggest oil cut in the industry’s history, slowly turned the market round, helping prices back to what many regard as a “Goldilocks” level today – around $80-$85 per barrel where producers and consumers are reasonably happy.

Incidentally, Saudi Arabia and the UAE are among those Opec members still paying the price for that action, holding production levels well below capacity to help ensure balance between supply and demand.

Alamy via Reuters

To suggest that Sheffield’s role in this amounts to anti-consumer collusion is a misreading of the historical facts.

But there is more that the FTC throws at him. In 2017, during the annual “oil man’s Davos” – CERAWeek in Houston – Sheffield had dinner with the late Mohammed Barkindo, then secretary general of Opec.

Oil markets were discussed. You have to ask: what were two such luminaries of the energy world supposed to talk about? The Houston Rodeo?

Sheffield has many friends in the Arabian Gulf oil industry who are appalled at the way he has been treated – but not surprised. When it comes to oil, they have come to expect such ideologically driven spite from the Biden administration.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia and is a media adviser to First Abu Dhabi Bank of the UAE