There’s oil in them thar shale fields. And maybe some price-fixing and collusion, too.

Following increased scrutiny from antitrust regulators, US shale producers are on the receiving end of a wild well of class-action lawsuits alleging anticompetitive behavior, with the latest suit filed on Monday. And suddenly, the industry’s increasingly cozy relationship with the Organization of the Petroleum Exporting Countries (OPEC) is being called into question.

Shale Game

The frack-happy cowboys down in Texas engaged in a price war with OPEC through most of the 2000s and 2010s, but a post-pandemic truce of sorts has taken hold. When OPEC producers slashed production last year to keep prices high, US producers opted not to step in and fill the vacuum, keeping domestic prices frustratingly elevated. “OPEC and shale are much more on the same team now, with supply discipline on both sides,” Joseph Sykora, a fund manager at Aptus Capital Advisors, told Bloomberg a year ago.

The discipline was good for business. US oil producers slashed their reinvestment rate below their 10-year average for the past couple of years, according to Bloomberg Intelligence, and profits soared. And while the domestic firms claim it’s simply a matter of pivoting toward returning cash to shareholders, others call it collusion: 

• Last week, the Federal Trade Commission alleged that Scott Sheffield, former CEO of Pioneer Oil — a leading producer in the Texas Permian Basin, and soon-to-be subsidiary of Exxon — used his power and position to “align US oil production with OPEC and OPEC+ country output agreements, thereby cementing the cartel’s position and sharing in the spoils of its market power.”
• Along with myriad public statements, the FTC’s claims are based on hundreds of WhatsApp and text messages sent by Sheffield to OPEC leaders. That sparked at least 10 class-action lawsuits brought against Pioneer and other Permian Basin players filed by consumers and other parties who say they were harmed by elevated prices.

“OPEC members are open about their cartel behavior, confident that sovereign immunity will protect them from answering for it in US courts,” Stuart Gross, an attorney at law firm Gross Klein representing Nevada-based commercial fishermen in one of the suits, told the Financial Times. “These US oil companies enjoy no such protection and will be held to account.” For its part, Pioneer said recently that the wave of allegations “reflects a fundamental misunderstanding of the US and global oil markets.”

FTC Me in My Office: The Permian Basin mega-mergers have long been about the only industrial corner receiving a green light from the newly energized FTC. That may be changing. While the FTC formally approved Exxon’s $60 billion Pioneer takeover last week, it barred Sheffield from playing any role in the new company. Meanwhile, Senate Majority Leader Chuck Schumer called on Sunday for the FTC to “pump the brakes” on Chevron’s $53 billion acquisition of Hess. Time to lower the well pump even more.

One China-based app isn’t waiting for US lawmakers to banish it. 

Temu, the e-commerce app that has spent a fortune marketing itself to American consumers, is reportedly starting to hedge its reliance on the US market, sources told The Wall Street Journal. It’s a striking about-face for the company, and one that was reportedly prompted by the US government voting to either ban or force a sale of fellow China-owned company TikTok.

TikTok’s Hand Me Downs

It’s hard to overstate how bombastic Temu’s marketing drive has been. Its ad spend on social media has reportedly made it one of Meta and Google’s biggest clients, and it bought not one but four Super Bowl ads this year. The evidence suggests that the marketing blitz worked, too — arguably a little too well, as Temu and its e-commerce rival Shein have had the same effect on the air freight industry as a lead ball on a rubber sheet.

Temu’s business model — selling a seemingly random assortment of products at low, low, (seriously should they be that low?) prices — is pretty different from TikTok’s, so the question is why should Temu wince when TikTok gets hit? The answer is that Temu and Shein could easily be next on the US-China chopping block:

• The TikTok bill whipped through the US government with relative speed, compared to the pace of most legislation. TikTok has since filed a lawsuit against the US government which is likely to drag on for years, but it was still a shock to the system.
• Temu and Shein were name-checked by US lawmakers last year in a paper that called them “data risks,” as well as highlighting the presence of forced labor in their supply chains.

Sources told the WSJ that Temu is trying to focus its efforts on other countries, and it expects US sales this year to make up a much smaller sliver of overall sales, down from 60% last year to less than 33%.

Why Can’t We Be Friends? While Temu gently backs away from the US, Shein is still trying to charm its way in. CNBC reported that as Shein readies itself to go public on the US market, it’s working hard to join the National Retail Federation (NRF). So far, though, the e-commerce giant’s applications have been repeatedly rejected, sources told CNBC. Maybe Shein doesn’t know the rules, like that the NRF wears pink on Wednesdays.

Kitty has gone from snoring back to roaring. 

After a three-year hiatus, day-trader Keith Gill — a.k.a. “Roaring Kitty” — returned to social media on Sunday, sparking surges in shares of GameStop and other companies that gained popularity during the 2021 meme-stock craze. And while that fervor was short-lived, this one might be even shorter.

A True Underdog Story

Meme stocks are popular because they’re popular, and their share prices tend to vault to extraordinary levels in a matter of days, driven by social media chatter among traders often looking to disrupt establishment short-sellers.

Around the start of 2021, participants in the Wallstreetbets community on Reddit hatched a “short-squeeze,” with waves of amateur traders using platforms like Robinhood to buy shares in given-up-for-dead stocks like GameStop, AMC, and Blackberry. In a matter of weeks, the video game retailer — whose business had not fundamentally changed in any major way — saw its stock rise by more than 2,000% to nearly $87. 

Gill, the driving figure behind the craze, saw his Gamestop stake gain tens of millions of dollars in value, while hedge funds like Citron Research and Melvin Capital lost billions. Shortly after the craze, Gill — whose story was adapted for the film “Dumb Money” — retreated from the social media limelight. Until this past Sunday:

• Gill took to X to post a cartoon of a man playing a video game, sitting up in his chair. For those who don’t speak meme or gamer, it essentially means “this just got serious,” like Link versus Ganondorf for the Triforce levels of serious.
• As a result, GameStop shares climbed 110% just an hour after the opening bell Monday, and the stock was halted multiple times due to volatility. At the same time, short sellers had suffered a mark-to-market loss of more than $1 billion, according to S3 Partners data. 

Gamestop closed up 74.4% on Monday, while other meme stocks like AMC and Reddit rose 78.4% and 8.7%, respectively.

Nostalgia Bait: Financial experts hardly expect a repeat of 2021. Thomas Hayes, chairman at Great Hill Capital, told Reuters, “It was a point in time when you had a bunch of people stuck at home with free money and nothing to do and that’s no longer the case.” But if the ride does go on for a few more weeks, it could be good fodder for a sequel.