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The Federal Trade Commission (FTC) has approved a major oil merger between Chevron and Hess Corporation while accusing Hess Corporation CEO John B. Hess of conspiring with OPEC to manipulate oil prices.
What’s OPEC?: OPEC is a coalition of 13 major oil-producing nations, including big players like Saudi Arabia, Iraq, and Venezuela. These countries collaborate to manage oil production and have a significant impact on global oil prices. With control over about half of the world’s oil supply, OPEC can influence prices by adjusting how much oil its members produce. While their aim is to stabilize the oil market, critics often claim that OPEC’s actions can drive prices up by limiting production to keep supply tight.
Digging in on the allegations: The FTC claims that Hess secretly communicated with officials from OPEC and Saudi Arabia to push for “inventory management,” a strategy aimed at cutting oil production to artificially inflate prices. According to the FTC, this effort was intended to counter the competitive pricing benefits brought about by the U.S. shale boom, which had lowered global oil prices by ramping up production.
Hess Corporation & Chevron Merger: The FTC’s announcement follows its approval of the $53 billion merger between Hess Corporation and Chevron, with one condition: John Hess is barred from participating in the newly merged company. The FTC cited concerns that Hess’s involvement could raise the risk of anti-competitive behavior. However, they did state that Hess would still be allowed to consult with Chevron, but only in relation to two specific areas: his discussions with Guyanese government officials regarding Hess’s oil and health ministry activities in Guyana, and his involvement in the Salk Institute’s Harnessing Plants Initiative.
