Evidence of price-fixing in the oil industry?

https://www.thebignewsletter.com/p/an-oil-price-fixing-conspiracy-caused

by toomuchtodo • 2 years ago

248 167 2 years ago

And our government has literally made it its mission to limit domestic oil production (canceling keystone, blocking permits, ceasing to lease federal land. I’m guessing all the net zero regressives were quite happy about the high prices too

I remember at the time Biden was asking (failingly) Saudi & even China to pump more oil lol

Pet_Ant• 2 years ago

If the prices mean that we move off of oil... we'll it's painful medicine.

The planet's capacity to absorb CO2 is limited and too many people are too happy to be deficit spending on that account because it's not as visible. When that bill comes due, it won't be as easy to pay it off with green rectangles.

highwayman472• 2 years ago

Even if this were true, China, Russia and India aren’t going to reduce their emissions. So they will thrive with the cheap energy and overtake the west.

google2341235• 2 years ago

As long as you (and the Democratic Party) are honest about it during elections. I’d love for you to say this publically, see how the American people want to suffer and go back to a lower standard of living so that you can feel better about yourself.

dylan6042• 2 years ago

If the prices mean that we move off of oil... we'll it's painful medicine.

I'm know I'm an odd duck, but I think the price of gasoline in the US is way too cheap. Even at the highest price per gallon in the US, that's about the same price per liter in Europe. I'm not considering bigOil profits in saying that. I'm saying that until the price of gasoline hurts, nobody will care about the ramifications from using it (if even then). People are less concerned about the environmental effects as they are their personal financial effects, but I'll take it either way if it reduces the use.

rokkitmensch2• 2 years ago

This attitude of imposing pain that maps trivially to regressive taxation on lower- and middle-class voters is not a good look for the green left.

hedora• 2 years ago

Instead of sending the money to oppressive regimes, we should send it to atmospheric carbon capture facilities.

It costs about $1/gallon (maybe $2/gallon, with recent inflation) to suck the CO2 emitted by gasoline out of the air, and put it back in the ground.

That's a heck of a lot less expensive than dealing with the consequences of climate change, and certainly less than the amount gas prices fluctuate due to price gouging, etc.

mjmsmith2• 2 years ago

"The environmental constraints bit was in retrospect an obvious lie."

dylan6042• 2 years ago

It was pretty obvious when said without needing retrospect

MisterBastahrd• 2 years ago

It's almost as if you have absolutely no clue what you're talking about.

Keystone was about pumping oil straight from Canada to the Gulf Coast for the export market, crossing key aquifers to get there. It literally never mattered with respect to US gas prices and never will regardless of what occurs in the future.

The US literally produces more oil today than any country has in the history of the world. One of the main reasons its doing so is because oil prices are high enough to sustain production. Making oil cheaper REDUCES production. Wells become unprofitable to pump and maintain. When Trump negotiated a deal to crash the oil market, thousands of people in the industry lost their jobs.

abracadaniel• 2 years ago

More than that, the Keystone pipeline would have increased oil prices in the US. Canada exports most of that shale oil to refineries in the US. The pipeline would have bypassed the US and forced us to compete with other buyers for the oil. The pipeline could only have had negative impacts on the US. https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/ma...

karagenit• 2 years ago

According to the EIA domestic crude production is at an all time high: https://www.eia.gov/todayinenergy/detail.php?id=61523

daveguy• 2 years ago

We are producing more oil in the US than we ever have.

knowaveragejoe2• 2 years ago

Why are you so committed to being wrong?

highwayman472• 2 years ago

I look forward to nothing being done about this and no one being held accountable.

hypeatei• 2 years ago

Yep, wouldn't expect anything else tbf. All the institutions and systems we've created are to maximize profits.

No end goal in sight, just make number go up.

Thiez• 2 years ago

In Vietnam they know how to deal with this kind of thing. Maybe the people responsible can get the Trương Mỹ Lan treatment?

colpabar• 2 years ago

For me the best part was everyone telling us that nothing like this was happening, that something like this wasn't even possible, that corporate greed could NEVER have ANYTHING to do with the price of everything going up.

knowaveragejoe2• 2 years ago

In the worst case scenario your suspicions explain ~20% of price increases, so let's not get carried away with "I told you so"s.

wolverine8762• 2 years ago

In my personal experience, lots of people were talking about it, including the White House; there were articles in the NY Times about it, etc.

dang• 2 years ago

Ok, but please don't post unsubstantive comments to Hacker News.

I understand the reason for repeating these sentiments—it's the same reason why they get upvoted to the top of threads*—but repetition of this kind is what we're trying to avoid here.

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

https://news.ycombinator.com/newsguidelines.html

* I've marked this one off topic now.

gwbas1c3• 2 years ago

The FTC just found evidence that American oil companies colluded with the Saudi government to hike gas prices, costing the average family $3,000 last year. The question is, what can we do about it?

Electric cars and heat pumps.

This is why people paid a premium (until about a year ago) for electric cars. Fixed costs are better than variable costs.

trifurcate• 2 years ago

What makes you think that the energy sector overall is immune to this while oil isn't?

flakeoil• 2 years ago

More and smaller players in electricity production.

Half the oil and gas production comes from an official cartel so it's kind of in the oil sector's DNA with price fixing.

NewJazz2• 2 years ago

More opportunity for substitutions when your fuel is electrons instead of a specific blend of fossil fuels processed in a specific way.

That said for profit electric monopolies are indeed a scourge.

SkyPuncher• 2 years ago

Because there are multiple ways to generate electricity- including at-home options for many people.

There’s also an interesting factor in timing and latency of the grid. Peak usage is typically mid afternoon. While least usage is overnight.

There’s essentially excess capacity during the time period that most people charger their car.

bryanlarsen• 2 years ago

Not immune, but more resistant:

- electricity can be generated many different ways

- many generation sources aren't dependent on resupply. Spiking the price of lithium doesn't prevent existing batteries from working, it only makes new ones more expensive. Solar, wind, hydro and nuclear (to a lesser extent)

- electricity supply is heavily regulated, for better or worse.

throwway1203852• 2 years ago

It's not that it currently is immune, it's that there's a compelling story for the energy sector to become immune from it as we reduce our dependence on fossil fuels.

manmal2• 2 years ago

Where I live, heat pumps suffered insane price hikes because production couldn’t keep up with demand during the Russian gas scarcity scare. I‘m talking increases of €10+k.

And electricity prices are especially sensitive to gas/oil prices due to how European energy market prices are set. We still haven’t fully recovered from the insane gas price hike that caused all electricity to 2-4x in price (with huge downstream effects on overall inflation).

Retric2• 2 years ago

People using gas or oil ran into similar price hikes.

PV or if you’re further north solar thermal actually protected people from price spikes.

cameldrv2• 2 years ago

Doesn’t work if you’re in most of California unless you have solar. Price fixing oil is bad, but you can switch to electricity for some uses. If everything is electric and electricity is a monopoly, it’s the worst possible situation.

rowanG0773• 2 years ago

Why? Electricity is so easy to generate that a monopoly is impossible.

cortesoft• 2 years ago

That is why I have solar and batteries. Don’t have to worry about energy costs.

dpc050505• 2 years ago

There's a state monopoly on hydroelectricity in Québec and we pay the lowest rates in North America while Hydro-Québec pumps a billion dollars into provincial government coffers every year.

spxneo2• 2 years ago

and where are the components for electric car batteries coming from again and what is the harm done to environment/countries being mined?

occz• 2 years ago

It's miniscule when compared to the ongoing harms of oil extraction and implying otherwise is extremely dishonest.

xsmasher• 2 years ago

Are you implying that the environmental and political fallout from electric cars is somehow worse? Or just that electric cars are not 100% cost-free?

Everyone here knows that creating an electric car requires emissions; but over its lifetime it's a great improvement over a gas-burning car.

rconti• 2 years ago

I have an electric car, and I'm starting a hugely expensive remodel that will involve migrating to a heat pump and electric tankless water heater, but even with solar, it's a laugh to say that my PG&E rates are a fixed cost!

zer00eyz• 2 years ago

> PG&E

Fuck PG&E.

I live in the Bay Area, and candidly my choices for solar, inverters, batteries, heat pumps and any thing that will make a home eco friendly are abysmal.

I have a fairly unique roof for the area. There has only been one solar installer who did not run when I explained what I needed. They all have a cookie cutter approach to minimize costs and maximize profits. There is no variance or selection. It's a onesie fits all solution to a dynamic problem.

Electric water heating is interesting. You should look to install a tank and a tankless heater. It's called a booster configuration. Set the tank up to run during the day when you have free power and then only hit the tankless when it runs empty (or your variable costs are low).

Good luck finding a plumber who knows how to set it up.

gwbas1c3• 2 years ago

electric tankless water heater

I went with a heat pump water heater.

The tankless heaters use so much amperage that I'd overload my main breaker if someone took a bath while the car is charging and the heat it running.

autoexecbat• 2 years ago

PG&E makes electric-only a little scary. I'll keep 1 EV and 1 ICE car rather than going 2 EVs due to them

mschuster913• 2 years ago

Depending on how much you drive a day, a propane powered generator pack for a few thousand bucks (chinesium ones start at ~1000 $ [1]) in your shed should be enough to charge during the night and keep your home powered as well, and unlike gas/diesel, propane doesn't go bad during storage.

[1] https://www.amazon.com/-/de/dp/B01M0N8256/ref=sr_1_3

graymatters• 2 years ago

What to do about it - hit these oil companies, including the Saudi ones, with a huge class action law suit. Additionally US government must fine heavily instances of collusion and oligopoly so that others thinking of following path will be deterred.

dealbreaker• 2 years ago

Except, last year electric prices were so high in Europe. As in 10 times higher. If it wasnt for thr government stepping in, our family business would've been decimated.

WarOnPrivacy• 2 years ago

> The question is, what can we do about it?
Electric cars and heat pumps.

So us renters who drive long distances every day - when can we expect to come home to a 1k mi range EV and discover our landlord installed an EV charging system and new heat pumps? Because that sounds like a pretty awesome day.

eulers_secret• 2 years ago

This is me, I'm a renter and my complex will never install chargers. I've tried, it's a no-go.

That said, 50MPG vehicles are common these days. My '07 Prius gets 48, measured, a newer Camry/Accord/Sonata hybrid will get ~50MPG as well. Add an openpilot driving system and it's almost like a private train car.

I drive 80 miles round trip, 5x a week for work. That works out to ~$2000/yr for gasoline. That's really not that bad at all! Just don't drive a crossover or truck as your daily.

I'll probably never buy electric, because I don't want to buy a house (just not for me) and I don't think apartments will install a charger-per-spot (personal requirement). That's OK, hybrid is pretty great.

On the heat pump side, I only have to heat 700 sqft - it requires little energy and is so little cost-wise I don't even track it.

mschuster913• 2 years ago

Electric cars and heat pumps.

And guess what the fossil fuel lobby is pumping millions upon millions of dollars in propaganda against.

It's been utterly nuts to watch in Germany - our local tabloid rags and their relentless campaign against heat pumps (as well as a botched communication regarding an energy-efficiency law from the government) actually worked good enough to put local manufacturers into a serious crisis [1]. Electric cars are in a similar bind - barely any government subsidies combined with falling gas prices, a lackluster / too expensive offering by everyone but Tesla and Tesla focusing more on the Cybertruck (that can't ever be certified to European standards) than on boosting Model 3 quality combined means that the % of electric cars on new registrations went downhill from 16% to 12% [2].

On top of the fossil fuel lobby spending comes heavy smear campaigning from Russia and its 5th column (aka, parts of the far left, as well as the most popular far-right party), who have identified anything "green" as a fracture point of society.

[1] https://www.mopo.de/im-norden/niedersachsen/auftragsflaute-w...

[2] https://www.adac.de/news/neuzulassungen-kba/

jhallenworld• 2 years ago

Ban oil exports. Why are we selling our oil overseas?

I would also be OK with tariffs on exports, but they are not legal (it's in the constitution: concession for southern states, protecting their cotton exports).

Also: fix Venezuela.

chankstein38• 2 years ago

I feel like I recall watching something where an oil exec literally said they were doing this. He was basically saying this was a way to get some profits back after they lost a ton of money during the lockdowns.

1980phipsi• 2 years ago

Oil industry profits got vaporized by the decline in prices in the aftermath of the shale revolution. Prices fell sharply from 2014 to 2016. So after this, capital discipline became the watchword. That meant they wouldn't overinvest in new wells, keeping supply constrained. While oil futures had some really weird behavior during the lockdowns, the market demand for capital discipline proceeded it.

alach11• 2 years ago

It’s pretty absurd that the US government talks out of both sides of its mouth on this issue. There’s an effort to divest from oil, shut down permitting, and discourage investment. And when companies respond to this by reducing investment, there are claims about “windfall profits” and “price-fixing”.

There’s no grand conspiracy here. Shale companies over-invested in growth, lost their shirts in 2015, and got punished by investors (or went bankrupt). Then prices recovered, they over invested in growth, and got demolished again as oil prices crashed and even briefly went negative in 2020.

Fresh off these two crashes, it’s not surprising at all that companies are exercising capital discipline and not taking on debt to drill. Shareholders don’t want them to do that!

nemomarx• 2 years ago

If they're lowering investment, couldn't they lower prices?

singhrac• 2 years ago

I traded crude oil professionally until early 2022 and I remember that was how we justified low domestic production in mid 2021 as well (i.e. "producers think these prices are temporary, so they aren't investing").

In retrospect (and these are all guesses with hazy memory) we probably overestimated the cost of turning an oil well on and off.

But exchanging text messages with OPEC to price-fix is damning. An active right wing party would decry this as foreign interference and communism (where's the free market?). Even ignoring the market impact, how can you let domestic producers collaborate with foreign governments to control such a serious macroeconomic input like this? It's like China paying Intel a bribe to produce worse chips.

jmyeet• 2 years ago

Governments have two broad ways of fighting inflation.

The first way is to raise interest rates. This is essentially a wealth transfer to banks and their owners while hurting individuals and businesses to stifle economic activity. This is what we always do. Why? Because capital owners demand it. The other way cannot be tolerated or entertained.

The second way is taxation. Some countries (eg Spain) enacted a windfall profits tax. Unlike interest rate hikes, taxation only targets profitable corporations. It allows a government to redistribute wealth to those who most need it, fund infrastructure and so on. And it disproportionately affects those who price gouging for massive profits, such as in the case of the oil and gas industry. Companies may reinvest profits into their business to avoid these excessive taxes. Great. Perfect. Love to see it.

This latest price-fixing scandal is going to turn into a huge deal. This is just the beginning.

But it's not th esole reason for price hikes in 2020-2022. A lot of that was because the then Trump administration browbeat OPEC into cutting production in early 2020 [1], which was a truly disastrous policy. You can see the effects on the 5 year view [2] very clearly.

[1] https://www.reuters.com/article/idUSKBN22C1V3/

[2] https://tradingeconomics.com/commodity/crude-oil

marcosdumay2• 2 years ago

If you insist on controlling the noise in monetary phenomena through fiscal policy you'll have a really bad time.

But people are saying the Panama canal has a drought problem. Maybe you can help with a bucket, you'll probably have a larger impact.

abeppu4• 2 years ago

If you insist on controlling the noise in monetary phenomena through fiscal policy you'll have a really bad time.

Isn't that more a political problem than an economic insight though? We know fiscal policy impacts monetary phenomena (PPP loans, stimulus checks, the child tax credit, etc had inflationary effects), but it's too politically easy to spend more, and too politically difficult to raise taxes, and it's definitely too hard to do either in a timely manner in response to changing economic conditions.

But if we had given a politically independent body like the Fed control of tax / spend knobs instead of interest rates, and allowed them to evaluate whether to change those things on a scheduled basis as economic data arrive ... maybe that would also work, we'll just never get the opportunity to try it.

thegrim33• 2 years ago

The claim: "there’s now evidence that price-fixingp in the oil industry alone may single-handedly be responsible for a little over a quarter of the total inflationary increase in 2021."

Ignoring the typo, which makes me completely confident in their ability to accurately report on these events, the claim is: that price fixing / collusion happened.

Their evidence: "Yesterday, the Federal Trade Commission released evidence confirming that collusion played a serious role in hiking oil prices at that time."

They claim that the FTC has evidence of collusion, and they link to a release from the FTC.

The FTC evidence: "The Federal Trade Commission took action to resolve antitrust concerns [..] the proposed consent order seeks to prevent Pioneer’s Sheffield from engaging in collusive activity that would potentially raise crude oil prices"

So .. they took action to resolve "concerns", to be preventative so that "collusive activity" that could "potentially" raise prices doesn't happen, in the future.

"The FTC alleges in a complaint that Sheffield has, through public statements and private communications, attempted to collude" .. "Sheffield sought to align oil production"

So .. he "attempted" to collude, he "sought" to collude, or he did collude?

So, to summarize, the evidence uses wording like "concerns, prevention, in the future, attempt", but nowhere states that anything actually DID happen, whereas the author of this article interprets that as evidence that it absolutely did happen?

virtue3• 2 years ago

in the actual FTC release: "Through public statements, text messages, in-person meetings, WhatsApp conversations and other communications while at Pioneer, Sheffield sought to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+."

"Sheffield, for example, exchanged hundreds of text messages with OPEC representatives and officials discussing crude oil market dynamics, pricing and output. In discussing his efforts to coordinate with Texas producers under a production cut mandated by the Railroad Commission of Texas, 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,” he said, adding: “I was using the tactics of OPEC+ to get a bigger OPEC+ done.”"

"NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions."

This is also legalize, so he hasn't been PROVEN to yet; but it's obvious they have a lot of things to go through here.

AnimalMuppet• 2 years ago

OK, but even assuming all the legal accusations are correct, "a little over a quarter of total inflation in 2021" is still massively unsupported.

somenameforme2• 2 years ago

I was also just reading the FTC complaint [1] because this article reads as painfully biased.

And perhaps somebody else can fill in the blanks here, but so far as I can tell, the FTC is not alleging any sort of wrongdoing, but instead filing a complaint against a proposed merger between Exxon and another company, which could enable larger scale constraints on competition. Their evidence are the messages and comments from the head of the to-be-merged company, who made efforts to follow along with OPEC price standards (or even take the lead) as a means of maximizing profit.

Where 'strategic pricing' ends and price fixing begins is not at all clear to me, especially in a field like this where global prices are actively controlled by a price fixing cartel. But it seems to me that the main article is engaging in some extreme speculation, hyperbole, and sensationalism - while presenting it all as matter of fact.

[1] https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpio...

Workaccount22• 2 years ago

This is what happens when people think that blogs are "the real news".

toomuchtodo2• 2 years ago

Blog author: https://www.economicliberties.us/matt-stoller/

Matt Stoller is the Director of Research at the American Economic Liberties Project. He is the author of the Simon and Schuster book Goliath: The Hundred Year War Between Monopoly Power and Democracy, which Business Insider called “one of the year’s best books on how to rethink capitalism and improve the economy.” David Cicilline, Chairman of the House Antitrust Subcommittee, has called Stoller’s work “an inspiration.” Stoller is a former policy advisor to the Senate Budget Committee.
He also worked for a member of the Financial Services Committee in the U.S. House of Representatives during the financial crisis. While a staffer, he wrote a provision of law mandating a third party audit of the Federal Reserve’s emergency lending activities. He also helped cut part of a $20 billion subsidy to large financial institutions. His 2012 law review article on the foreclosure crisis, The Housing Crash and the End of American Citizenship, predicted the rise of autocratic political forces, and his 2016 Atlantic article, How the Democrats Killed their Populist Soul, helped inspire the new anti-monopoly movement. His writing has appeared in the Washington Post, the New York Times, Fast Company, Foreign Policy, the Guardian, Vice, The American Conservative, and the Baffler. Stoller writes the monopoly-focused newsletter Big with tens of thousands of subscribers, which you can subscribe to here.

lumost2• 2 years ago

TBH - this sounds like a very weak counter-point. The pertinent information is that oil production declined in the US during the 2021 inflationary period. A point in time where under classic money theory - either investments should have been happening too quickly or too many dollars were chasing too few goods.

Something happened in the oil industry which is unexplained by economics (at least to my knowledge), and trivially explained by collusion/price-fixing.

HDThoreaun• 2 years ago

Something happened in the oil industry which is unexplained by economics

1. Tons of producers went bust during the shale boom and covid price fallout.

2. Remaining producers see that the future will require less oil and remember the rest of the industry failing when they increased production.

3. They dont increase production.

This is exactly what economics projects. Less competition = worse prices. It doesnt take collusion for everyone to come to the same cocnlussion.

objektif• 2 years ago

PG and all the other smart people were making fun of average citizen on twitter when they blamed corporations for some of the inflation.

somenameforme2• 2 years ago

I wouldn't quite rely on this article as a game changer. The author's evidence for his shocking headline is exclusively him assuming his own conclusion, and then adding a healthy helping of fudgery on top of that. From the article

---

How do you aggregate just the oil industry? Well, it’s pretty clear that in 2021 and 2022, the industry did fantastically well, with the “the top 25 companies [making] more than $205 billion in profits in 2021,” and an “even more astounding” amount in 2022. Of course, not all profits are due to price-fixing, but $205 billion is just the top 25, not the whole industry. And profits got much much better the next year.

So let’s layer on a rough guess of a $200 billion increase in profits in 2021 that Scott Sheffield implies, which is 27% of the total corporate profit increase that year. That’s a pretty astounding amount, more than a quarter of the total inflationary increase being a result purely of a price-fixing scheme.

---

So he's assuming that 100% of inflation is caused by corporate profits (which is beyond absurd), and then stating that since the oil industry made up 27% of total corporate profits (using evidence that seems to be wildly hand-wavey at best, even though the exact numbers are readily available), that they therefore caused 27% of all inflation. And somehow, the giant price-fixing conspiracy (which is a gross misrepresentation of what the FTC is saying) was the reason they made these 27% of profits (which is absurd).

NewJazz2• 2 years ago

"smart people"

abeppu4• 2 years ago

Ok, so any time bad corporate behavior causing inflation comes up, I have to wonder -- how much oil stock would you need to own for this contribution to inflation to be good for you (outweigh your increased costs)?

When price increases cause greater revenue to asset holders from consumers, there's some spectrum of spending to asset holding, and most people that own nothing are losing out, and Warren Buffett who owns a lot but is famously modest in his lifestyle is benefiting ... but how would you estimate where the breakeven point is? Is a lean FIRE person benefiting? Exxon stock has had a really strong 3 years, but we don't get to observe the counter-factual of how it would have behaved without this price-fixing.

mistrial93• 2 years ago

all that assumes perfect selfish behavior by each individual investor. Most stocks are not held by individuals, and most individual adults are not invested in stocks.

The rational question raised here is not terrible, but several assumptions in it, together, make the mental model that has enabled rampant destruction of the one and only natural Earth in the past two decades with full knowledge of it.

abeppu4• 2 years ago

Asking who benefits does not require us to assume perfect selfish behavior from all investors, nor does it require us to assume that people who benefit from this behavior to want it to continue.

I don't think it requires the mental model you're alleging at all. I'm fully in favor of taxing carbon at a rate which reflects its actual externalized costs, as well as other emissions. I've argued that DAs should charge oil companies with manslaughter when people die in heat waves. I don't drive a car, I don't eat animals, and I plant native wildflowers. Being opposed to the destruction of the planet does not mean I should not ask "who actually benefits from economic trends that everyone complains about?"

Piketty argued that the share of growth that goes to capital vs labor will determine a great deal about how inequality changes over time, and insofar as artificial price increases are just increased revenues to asset holders, this behavior has importance not just today but in shaping the future.

Most stocks are not held by individuals

Isn't that a distraction? Even when stocks are held by, e.g. an insurer, another company, ultimately ownership of most wealth tracks back to some collection of natural persons. Even in cases where 'ownership' doesn't track back to people, there are still beneficiaries, e.g. people who have pensions don't directly own the assets that the pension fund holds.

bilsbie• 2 years ago

Wait until they find out about OPEC.

toomuchtodo2• 2 years ago

The US has no control over OPEC. It absolutely has control over monopolies and cartels within its borders. That’s part of the story; something can be done about this behavior in this jurisdiction and situation.

mcconaughey• 2 years ago

Ignoring the fact that this article doesn't clearly state the "evidence" that the FTC found in this "conspiracy", it misunderstands what occurred with US Shale producers from 2010-now.

In the 2010s, US Shale Producers got hyped up on strong oil prices and the explosion of fracking. They massively overproduced, leading to the price cratering and a large majority of producers going out of business. Oil and gas was in severe distress from the late 2010s to the negative price drama in 2020.

When prices rebounded in early 2020s, there was a lot of scar tissue in the industry about overproduction. Producers are now extremely conservative. They are also well aware that clean energy is on the horizon and want to draw out this good cycle as long as they can.

Opposite to what the conspiracy theory states, OPEC and US Shale do not want prices to go too high in the short term, as this shock would accelerate the clean energy transition. They definitely want strong prices, but this $80-100 range is probably the sweet spot. Below $80, they might pull back, which is what we see from OPEC. But this certainly isn't some "conspiracy" to elevate oil to $200/barrel. These participants are sophisticated and are not that shortsighted.

I think the typical Democrat-Party view that "oil bad" and "oil corrupt" lacks nuance. It also ignores the profligate government spending that is driving excessive consumption (travel, etc.) causing a lot of these market dislocations the past several years. Now, they want to point the finger at some grand conspiracy. This seems not far off from Q-Anon on the other side of the political aisle.

a123b456c• 2 years ago

"If Texas leads the way, maybe we can get OPEC to cut production. Maybe Saudi and Russia will follow. That was our plan,” he said, adding: “I was using the tactics of OPEC+ to get a bigger OPEC+ done.”"

wolverine8762• 2 years ago

When prices rebounded in early 2020s, there was a lot of scar tissue in the industry about overproduction. Producers are now extremely conservative

In corporate America generally, it seems to be a widespread strategy to limit supply and drive up prices. Sometimes it's done explicitly and illegally, such as in rental housing (look up RealPage). Is there evidence that it's particular to shale production?

I think the typical Democrat-Party view that "oil bad" and "oil corrupt" lacks nuance.

You said it, then said it lacks nuance.

pxeger1• 2 years ago

excess consumption (travel etc.)

Could you explain what you mean by excess consumption?

code_biologist• 2 years ago

There are obvious charitable interpretations of OP's meaning, but you ask for effort without any yourself. Could you explain what you're unclear about? Could you explain if you ask for clarity at all, or because you have an underlying unexpressed disagreement? Is it about the definitional existence of "excess consumption" or is it the precise details you quibble with?

toss1• 2 years ago

>I think the typical Democrat-Party view that "oil bad" and "oil corrupt" lacks nuance.

Right. That is why, after 3 years of a Democratic Presidency and Senate, the US is producing more crude oil than any country, ever [0]. /s

If what you said about Democrats had even a shred of validity, that would not happen.

[0] https://www.eia.gov/todayinenergy/detail.php?id=61545

feoren• 2 years ago

There's a common mental exercise I see where smart people will engage in armchair economics to explain what "must have" happened in some situation, or the way the word must work. It all sounds very convincing, but the problem is that there are dozens of other equally convincing macroeconomic explanations. Somehow the ones people tend to pick happen to excuse every rich person from any accountability and foster a "greed is good" outlook, even though the other equally good explanations (left unsaid) would imply the opposite.

You shrug off the FTC's evidence here, and put the word "conspiracy" in scare quotes to discredit it. But the FTC claims "Sheffield sought to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+." and "Sheffield, for example, exchanged hundreds of text messages with OPEC representatives and officials discussing crude oil market dynamics, pricing and output." It feels to me like you're disregarding any actual facts and evidence in this case for your favorite macroeconomic explanation instead.

Teever• 2 years ago

I think what you're witnessing is a defense mechanism that comes about as a response to cognitive dissonance that is related to their deeply held personal beliefs about how the world works and their role in those workings.

To admit such a level of failure of the global system that they identify so strongly with is like admitting a personal weakness to some people. so they reject that possiblility any way they can.

UncleEntity• 2 years ago

I distinctly remember reading back in the day[0] the shale oil industry complaining how OPEC would drive up production with the sole intent of making shale oil extraction too expensive and bankrupting companies.

Apparently they went with the old "if you can't beat them, join them" defensive strategy.

[0] https://www.imf.org/en/Publications/WP/Issues/2016/12/31/An-...

Took way too long to find that link, thanks google...

EasyMark• 2 years ago

A lot of the small outfits also went bankrupt and had to bail, leaving only the big players. It's much easier to cartel/collude when there are a lot fewer competitors. I think all the big guys got the message that slow and steady was the way to go, so they keep the prices high and simply don't pump more than they planned on. I saw one oil man on TV saying the days of razor-thin profit margins were over for his company and they were going to stick to their slow and steady strategy.

bandyaboot• 2 years ago

This seems not far off from Q-Anon on the other side of the political aisle.

You either didn’t pay much attention to the sheer insanity of Q-Anon, or you view the world through an extremely partisan lens. Mentioning these two things in the same sentence is itself insane.

Democrat-Party

I’ll put my money on option 2.

kristianp• 2 years ago

News article with a more concise telling of this story.:

https://edition.cnn.com/2024/05/02/energy/oil-ceo-opec-scott...

dogman144• 2 years ago

I knew a trader in Texas in the 00’s. Worked with to oil traders. Total hearsay but heard stories from this person of traders in TX calling friends they grew up with who worked in Cushing Ok (large pipeline exchange or w/e the technical term is) to adjust the flows a bit over lunch and then change it back.

So, I believe it

chasd00• 2 years ago

It happens, Enron traders were turning off power plants in California that Enron owned to drive up electricity prices (and cause rolling blackouts). They only got caught after the implosion, i'm sure things like that happen all over the place in many industries.

quickthrowman• 2 years ago

How did it cost the average family $3,000 extra for gas in one year? I drove 12,000 miles last year and spent less than $2,000 on gas (480 gallons @ 25mpg, $4/gal), does the average family drive 100k miles a year or am I missing something.

I suppose if you add in all the gas (and diesel/bunker fuel) that you pay for indirectly through transportation costs, you could come up with $3,000 per family.

It is more or less impossible to collude with the Saudis to raise the price of natural gas in the United States (lack of transport), so they must be talking about gasoline.

tbcj• 2 years ago

It is in the article how the cost is not necessarily just from a family’s use of oil but the additional cost added to other things (like food, goods) because it costs more to transport those because of higher gas prices. Those costs are passed on to families so your grocery bill is higher because of it too.

wakawaka28• 2 years ago

Have you heard of OPEC? Lol

readthenotes1• 2 years ago

Larry Summers shows once again that "serious economists" are as reliable as "serious astrologers"...

Evidence of price-fixing in the oil industry?

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