Big Oil executives defended their record profits against accusations of price gouging in a contentious hearing before the House Energy and Commerce Subcommittee on Wednesday, as record prices at the gas pump continue to weigh on drivers across the country.
In testimony that lasted nearly three hours, executives from six fossil fuel companies including Exxon Mobil (XOM) and Chevron (CVX) repeatedly denied claims that their companies were holding back production, to keep prices down. high, even as chairman of the committee, Rep. Frank Pallone. (D-NJ) has publicly denounced oil producers for “ripping off” US consumers, instead of giving them relief.
“They are buying back their shares at an estimated cost of $40 billion this year,” Pallone said. “The big oil companies take their profits with one hand and take billions of dollars in taxpayer subsidies with the other. Meanwhile, Americans are being ripped off as corporations choose to keep production low to keep their own profits high.
Supply shortages caused by the pandemic and Russia’s invasion of Ukraine have pushed gas prices to new highs, with the national average price per gallon hitting a record high of $4.33 last month, according to AAA. Prices year over year have increased by more than 40%.
Although prices have moderated slightly in recent weeks, they have not fallen as sharply as international crude prices, which fell 23% from $139 a barrel in early March to $103 on Wednesday. This has led to allegations of price gouging by Democratic lawmakers.
“If the price of gas is determined by the local market, why is the price of oil falling when the price at the pump is still near record highs?” said Rep. Diane DeGette (D-CO).
“No company sets the price”
In testimony, Exxon Chairman and CEO Darren Woods said gas prices are simply a function of supply and demand, calling for a change in government policy that encourages increased supply of petroleum and natural gas.
“No company sets the price of oil or gasoline,” he said. “The market sets the price based on the available supply and the demand for that supply. Continued investment in new production to offset depletion and meet growing demand is the only way to achieve balanced markets and more affordable prices, bringing real relief at the pump.
Chevron Chairman and CEO Michael Wirth echoed those statements, pointing out that his company only owns and operates a fraction of Chevron’s 150,000 service stations worldwide.
“I want to be absolutely clear: we don’t control the market price of crude oil or natural gas, or refined products like gasoline and diesel fuel, and we have zero tolerance for price gouging,” he said. Wirth said. “Over the long term, gasoline price trends reflect trends in the price of crude oil, the main raw material for gasoline. However, it is not always true that gasoline prices will exactly follow the price of oil in the short term. »
The hearing comes as Democrats struggle to find a unifying strategy to tackle rising gas prices ahead of the midterm elections. While supply shortages caused by the pandemic and the Russian invasion of Ukraine have contributed to a dramatic increase in prices at the pump, recent polls show that Americans blame much of the blame on the policies of the Biden administration. A recent poll conducted by Quinnipiac University found that 41% of Americans blame the White House’s economic policies for rising gas prices. Twenty-four percent blamed the war in Ukraine and the sanctions against Russia.
Democrats have offered everything from a windfall tax to a “use it or lose it” policy on federal drilling permits as a potential solution.
Meanwhile, energy companies posted record profits. On Monday, Exxon Mobil said its first-quarter results will likely top a seven-year record, with operating profits from oil and gas pumping expected to reach $9.3 billion.
A global approach “
Republicans have pointed to Biden’s energy policy and a focus on climate change as the reasons for the price spike, pointing to the cancellation of the Keystone XL pipeline and the president’s pause in auctions for drilling on land public. In fact, the administration approved more federal drilling permits in its first year in office than the Trump administration in its first three years.
“It is impossible to generate confidence or invest in production today when future production is clearly blocked by this administration,” said Rep. Morgan Griffith (R-VA).
A record release of 1 million barrels per day from the US Strategic Petroleum Reserve has brought short-term relief. On Wednesday, the administration received additional help from the International Energy Agency, which announced that its members planned to release an additional 60 million barrels of their oil reserves, marking the largest release in the history of the IEA.
But critics of the administration have argued that lower prices are unlikely to be sustainable and will not alter supply and demand dynamics unless the government commits to long-term investment in fossil fuels.
Scott Sheffield, CEO of Pioneer Natural Resources, said it would take 18 to 24 months to bring new oil wells online. He called for a “comprehensive” approach to household energy production.
“This approach requires a combined effort to support the transition to renewable energy, including nuclear power and domestic production of minerals and battery materials, while simultaneously improving our nation’s infrastructure and building capacity. US operators to responsibly produce the fossil fuels that will be essential to sustaining the world’s economies and way of life during the transition period,” Sheffield said.
Akiko Fujita is a presenter and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita
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