Oil Company’s No. 2 CEO Conspired With OPEC to Keep Prices High, FTC Charges

Federal regulators allege that a CEO of a major oil company conspired with foreign governments to keep oil and gas prices high.

On Monday, the Federal Trade Commission (FTC) filed a complaint against John B. Hess, CEO of the Hess Corporation, accusing him of secretly communicating with the Organization of the Petroleum Exporting Countries (OPEC).

Hess’s company had sought a $53 billion merger with oil giant Chevron — a deal that the FTC ruled could only move forward if Hess himself was not involved with the follow-on company.

“We are very pleased that our merger with Chevron has eliminated this significant regulatory hurdle,” Hess said in a statement.

“This transaction continues to be an excellent deal for Hess and Chevron shareholders and will create a best-in-class integrated energy company that is ideally positioned for the energy transition.”

But although Hess will remain an advisor to Chevron regarding the new company’s business operations in Guyana, he will not get a seat on its board.

The FTC said in its complaint that its direct involvement in the new conglomerate would “increase the risk of harm” to market competition and “significantly increase” the risk of the type of secret coordination between rivals that is prohibited by federal antitrust law.

Hess, the FTC charged, urged OPEC officials to push, publicly and privately, for “inventory management,” or the reduction of pumping and fracking with the aim of raising prices.

This goal goes against the shale boom’s main selling point for American consumers, the FTC charges.

Record U.S. oil and gas production, enabled by tools like fracking and directional drilling, has undermined the “artificially low production levels and associated artificially high prices that OPEC oil producers seek to establish,” the agency said.

With 50 percent of global oil production under its control, OPEC has historically been able to influence or even set global prices, the FTC noted – something that would be illegal if done within the US.

As the U.S. fracking boom drove down global oil prices, “OPEC officials had an incentive to coordinate with these (U.S.) rivals rather than compete,” the agency charged.

Hess, in statements included in the document, praised OPEC’s pumping of price controls. He said on a 2021 Hess earnings call that the cartel leadership had done a “masterful job (in) giving the market what it needs but without oversupplying it,” and that “OPEC, I think, has done a great job managing the oil market.”

The complaint also contains redacted private communications that Hess allegedly had with Saudi Arabian oil industry leaders and the OPEC secretary.

Monday’s charges make Hess the second CEO of a major oil company to be charged with wrongful conspiracy with OPEC this summer.

The terms of the Chevron-Hess deal are similar to an FTC ruling from May regarding Pioneer Natural Resources, another fracking industry leader whose chief executive the agency accused of conspiring with OPEC to artificially raise prices.

In a dissenting opinion from the agency’s Monday decision, FTC Commissioner Melissa Holyoak argued that in both the Chevron-Hess and Exxon-Pioneer cases, “there was no reason to believe the law was violated.”

The Clayton Act, the 1914 antitrust law that the FTC claims Hess violated, “means whatever the majority needs it to mean to appease political demands,” Holyoak wrote.

“Unfortunately for Mr. Hess, the CEO of the Hess Corporation, the author of every fairy tale must also manufacture a villain, and today’s action has unjustifiably given him that label.”

In a press release, Hess Corporation representatives argued that the complaint is “without merit” and that the company has led the industry in reinvesting its profits in drilling operations – and therefore, possibly, in the supply of oil.

Chevron CEO Mike Wirth also said in a statement about the FTC’s ban on Hess’s direct involvement that it was “unfortunate that our Board of Directors does not get the benefit of his decades of global experience.”

As in the Chevron-Hess case, the FTC ruled that the Exxon-Pioneer merger could only go through if Pioneer’s current leadership was forced out.

The FTC alleged that Pioneer CEO and founder Scott Sheffield – who sought to sell his company to Exxon for $64.5 billion – engaged in “conspiratorial activities” that drove up oil prices, “leading consumers and North American companies paying higher prices for gasoline.” , diesel oil, heating oil and aviation fuel.”

Sheffield denied the allegations.

– Updated at 3:36 p.m.

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