Congressional Democrats excoriated executives from some of the world’s biggest oil companies, accusing them of exploiting the war in Ukraine and a surge in crude prices to reap windfall profits at the expense of American motorists.
Oil drillers are “ripping off the American people at a time of record profits” and “profiteering from our continued reliance on this volatile global commodity,” said Representative Frank Pallone, a New Jersey Democrat who heads the House Energy and Commerce Committee. Consumers are suffering “as these companies choose to keep production low so that their own profits stay high.”
The chief executives of six companies including Exxon Mobil Corp., BP America Inc., Chevron Corp. and the U.S. division of Shell Plc were grilled for six hours on Wednesday by a House energy investigations subcommittee amid intensifying scrutiny of profits that have climbed along with crude and fuel prices. Polls show high pump prices and inflation are wearing on voters ahead of the November midterm elections, potentially jeopardizing Democratic control of Congress.
Oil bosses defended steering profits to shareholders after weathering the Covid pandemic that decimated fuel demand and drove huge financial losses. They blamed uncertain regulations and federal policy for chilling investment, saying more pipelines, permits and leases are needed to encourage production. And they took pains to emphasize plans to boost domestic output, though some of the increases are designed to offset declining production from their overseas fields.
BP’s top U.S. official, David Lawler, said the company’s refineries are running “flat out” to deliver gasoline to American motorists, while Exxon’s Darren Woods and Shell’s Gretchen Watkins stressed their companies don’t own filling stations and therefore don’t have a say in retail fuel prices.
“Government plays a key role in this,” Woods told lawmakers. “Consistent, efficient and effective policies will help spur further investment in U.S. oil and gas production.”
The average cost of gasoline is $4.164 a gallon, according to the latest data from auto club AAA. That’s up 18% since the day before Vladimir Putin’s tanks rolled into Ukraine and 45% higher than a year ago — but down almost 4% from the record $4.331 reached last month.
Representative Diana DeGette, a Democrat from Colorado, highlighted the disconnect between the pump prices and crude. The price of oil has come down, she said, “but the price at the pump is still near record highs.”
There is generally a lag between movements in crude and gasoline as it takes time for costs to filter through the supply chain. And pump prices typically respond much faster to climbing crude costs.
“Oil and product prices are correlated over time” with retail prices potentially reflecting costs paid a week or two earlier, said Chevron CEO Mike Wirth. “These things do correlate over the long term, but in the short term, they don’t always move in tandem.”
Democrats and Republicans jockeyed over who was most responsible for high fuel prices. “Some of our witnesses today have stated publicly that their focus is not on helping American families or on fueling America’s economy — it’s enriching their shareholders,” said DeGette, who heads the subcommittee holding Wednesday’s hearing.
But Representative Morgan Griffith, a Republican from Virginia, said Democrats were deflecting blame that should be heaped on President Joe Biden for “his relentless pursuit of policies that discourage domestic energy production.” Biden’s policies, including a pause on the sale of new federal drilling rights, signaled a desire to restrict domestic oil production.
Texas Republican Representative Dan Crenshaw blamed the “contradictory messages” from Washington and for discouraging investment. With delayed permits and canceled permits, is it any “wonder why capital isn’t just springing toward oil exploration and production?” he asked. The prospect of tightened regulation of lending to fossil-fuel producers, which Crenshaw termed the “weaponization of the financial industry,” also is chilling investment, he said.
Exxon on Monday signaled its highest profit in 13 years, with first-quarter results expected to reach almost $11 billion, helping fuel Democratic accusations. Exxon, Chevron, BP and Shell spent $44 billion on stock buybacks and dividends last year and have promised $32 billion to investors this year, House Democrats said in a letter asking oil companies to suspend stock buybacks and dividends for the duration of the war in Ukraine.
Representative Lori Trahan, a Democrat from Massachusetts, accused executives of “profiting personally” from stock sales after Russia’s invasion of Ukraine, which stoked uncertainty about crude supplies and helped drive the price spike. “At least five top oil executives have cashed out some $99 million worth of stock personally since the invasion began,” she said, before singling out Scott Sheffield, chief executive of Pioneer Natural Resources Co., for selling shares.
Sheffield responded that the transaction represented his first sale of Pioneer stock in several years and came when share prices were “only up about 8 to 9% since the invasion.”
“I still have over 90% of my net worth in Pioneer stock,” he said.
Exxon’s Woods stressed that the industry weathered a steep drop in crude prices — which briefly went negative in 2020 — after the pandemic caused demand to plummet. “Our industry sustained huge losses to the point many went out of business and cut back on their investments,” he said. “This reduction in investment laid the foundation for our current market and supply challenges.”
And Sheffield told lawmakers that past overspending in shale production — which drove down prices — was unsustainable, leading to hundreds of bankruptcies. “The industry’s returns were dismal,” he said. “It became abundantly clear that for the industry to survive, the model of production growth at any cost needed to change.”
Those explanations did not sit well with Representative Ann Kuster, a Democrat from New Hampshire, who admonished the executives not to “use 2020 as an excuse for gouging the American people today.”
“We understand you did lose money during the pandemic,” she said. “Most Americans did.”
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