LAS VEGAS – In a first step toward dismantling an alleged conspiracy that has artificially raised the marine fuel prices paid by commercial fishers and other commercial marine purchasers throughout the United States, lifelong commercial fisherman John Mellor filed suit today against eight domestic shale oil producers in the United States—Permian Resources Corporation, Chesapeake Energy Corporation, Continental Resources, Inc., Diamondback Energy, Inc., EOG Resources, Inc., Hess Corporation, Occidental Petroleum Corporation, and Pioneer Natural Resources Company—on behalf of himself and other commercial purchasers of gas and diesel (collectively, “marine fuel”) from marine fuel docks.
While it’s widely known that the Organization of Petroleum Exporting Countries (“OPEC”) works behind the scenes to raise and maintain oil prices by manipulating the supply of crude oil, Mr. Mellor alleges that U.S. shale oil producers worked hand-in-hand with OPEC to restrict production of crude oil and thus inflate the prices that Mr. Mellor and his fellows paid for the marine fuel that they must purchase to make a living.
As alleged in the complaint, in the early 2000s, U.S. shale oil producers showed they could quickly boost domestic production of oil, in reaction to higher crude oil prices, thereby increasing the supply and bringing prices down; and they had a clear economic interest in doing so given their relatively low marginal cost of production. This proven ability to impact the oil market threatened OPEC’s stranglehold on global oil prices, leading OPEC to try to crush these producers by flooding the market with cheap oil. It didn’t work, and in the years before the COVID-19 pandemic, OPEC began to take another tack, reaching out to the shale oil producers that are the defendants here and trying to bring them into the fold. As detailed in the complaint, over the course of private meetings and calls, these defendants agreed to keep production low, in line with OPEC’s production cuts, rather than producing more oil, recognizing the additional profits they could earn if they played ball with OPEC, rather than undermining its manipulation of global crude oil prices. The end result is that commercial purchasers of marine fuel like Mr. Mellor were forced to pay higher prices.
As alleged in the complaint, these decisions, made at exclusive dinners with representatives of dictatorial governments and on the sidelines of international conventions in Vienna and Davos, only make rational economic sense in the context of a conspiracy to fix prices. Indeed, industry analysts long puzzled over how much value was being left on the table by the defendant shale oil companies, while smaller companies raced to increase production and capture increased market share. While the CEOs of the defendant shale oil companies made these moves as the result of meetings behind closed doors, they have made no bones about their ultimate goal: to keep their profits high by staying “disciplined” even when profits rise, i.e., to join OPEC’s conspiracy to raise prices.
These resulting increases in prices for oil and oil-derived products have harmed all consumers of crude oil derivatives, but the impact was especially heavy for small businessmen like Mr. Mellor, who purchases marine fuel for his fishing boat at prices inflated by the defendants’ conduct. Fuel prices comprise one of Mr. Mellor’s largest expenses, and rising costs make fishing an ever-tougher industry to compete in. Says Mr. Mellor: “Every time marine fuel prices go up, the amount I can make on the water goes down. While the CEOs of these oil companies are lining their pockets, I’m out here counting pennies to figure out how to just make a living.”
According to Stuart G. Gross of Gross Klein PC, a law firm that has long represented commercial fishers in California and across the nation and one of the firms representing Mr. Mellor in this case, “The alleged behavior perfectly showcases the dangers that are posed by companies that put illegal profits over hardworking people. OPEC members are open that about their cartel behavior, confident that sovereign immunity will protect them from answering for it in U.S. Courts. These U.S. oil companies enjoy no such protection, and will be held to account.”
The case is captioned Mellor v. Permian Resources Corp, et al., No. 24-cv-00253, and was filed in the United States District Court for the District of Nevada. It brings claims under the federal Sherman Act and the antitrust, consumer protection, and unfair competition statutes of the states of Alabama, California, Connecticut, Florida, Hawai’i, Maine, Maryland, Mississippi, New Hampshire, New York, North Carolina, Oregon, and Rhode Island.
Mr. Mellor and the proposed classes are represented by Stuart G. Gross and Travis H. A. Smith of Gross Klein PC; Jennifer A. Fornetti, Mark J. Bourassa, and Valerie S. Christian of the Bourassa Law Group; and Todd M. Schneider and Matthew S. Weiler of Schneider Wallace Cottrell Konecky, LLP.
A copy of the complaint is available here.