Congressional Democrats used an Apr. 6 hearing to accuse oil companies of “ripping off” the public with high prices for gasoline and other fuels, while Republicans placed the lion’s share of the blame for inflated prices on Biden administration policies.
The hearing of a House Energy and Commerce subcommittee was notable for the contrast between what oil executives explained and how little their testimony seemed to matter.
Rep. Frank Pallone (D-NJ), chairman of the full committee, said oil companies were “refusing to increase production,” were keeping production low to boost profits by keeping prices elevated. “They’re ripping off the American people,” he said.
Already available to Pallone was the prepared testimony of the executives in which they outlined their increases in production and their plans for more increases.
Darren Woods, chief executive officer of Exxon Mobil Corp., explained in his prepared text and his in-hearing remarks that his company planned to increase production in the Permian basin in 2022 by 25% over 2021, and that its 2021 production there was up 25% over 2020.
Michael Wirth, chief executive officer of Chevron Corp., said his company would increase capital spending in 2022 by 60% over 2021. Richard Muncrief, chief executive officer of Devon Energy Corp., said his company expected to bring 300 new wells online in 2022 and that it would invest about $2 billion in boosting its rig count. Scott Sheffield, chief executive officer of Pioneer Natural Resources Corp., testified that his company expected its spending in 2022 would bring almost 500 new wells into production.
The testimony appeared to make no impression on Pallone. The congressman combined his remarks about the companies refusing to increase production with the demand, “Produce more with the wells you have.”
Price variables, Russia
The executives tried to explain that they do not set prices, that the global oil market sets crude oil prices and that refined product prices primarily follow crude prices.
Rep. Diana DeGette (D-Colo.), chair of the Subcommittee on Oversight and Investigations, wanted to know why retail gasoline prices recently did not drop as quickly as crude oil prices. The executives explained that there can be much lag in the pass-through of price fluctuations, and that other factors such as strong demand and uncertainties about supplies play a role.
Executives also noted that while their brands are widespread, retailers using those brands in the majority of cases are independent businesses. It would be a violation of federal law for the oil companies to try to control prices set by independent companies, one executive said.
Testimony about market dynamics and plans for production increases did not appear to mollify DeGette. She asked, “What concrete steps can each of you take right now to reduce the price at the pump?”
Pallone added that he did not believe industry claims about markets. “The bottom line is you set the wholesale prices,” he said.
Rep. Paul Tonko (D-NY) asked about oil company investments in Russia. David Lawler, chairman of BP America Inc., said that within 96 hours of the Russian invasion of Ukraine, BP announced it would exit its investment in Russian company Rosneft. BP has held a 19.75% shareholding in Rosneft since 2013 (OGJ Online, Oct. 22, 2012).
Quitting that investment will mean a writedown of up to $25 billion, Lawler said (OGJ Online, Mar. 7, 2022). He spoke very clearly, leaving no room for misunderstanding.
But Tonko responded, “It’s troubling that you place profits over people and profits over our planet.”
Biden and a pandemic
More than one Republican on the subcommittee blamed the Biden administration for fuel price inflation between the time he took office and the Russian attack on Ukraine.
The hearing was “purely political,” a distraction from President Biden’s harmful policies, said Rep. Cathy McMorris Rodgers (R-Wash.).
Citing what they called Biden’s “anti-American energy agenda,” Republicans spoke of his effort to block leasing on federal lands and increase regulatory burdens, and they argued the administration has been trying to deter investment in fossil fuel companies.
Fuel prices rose rapidly after Biden took office and were high well before Russia invaded Ukraine, then went higher still, the Republicans said.
Oil executives have not been happy with Biden policies, and during the hearing they advocated a return to leasing for oil and gas exploration on federal lands. But their testimony did not suggest they blamed Biden for the fuel price inflation of 2021 or early 2022.
Shell USA Inc. President Gretchen Watkins testified that the onset of the COVID-19 pandemic initially caused a global economic contraction, including a historic drop in demand for fuels. The demand drop forced refineries to reduce production rates or shut down, and in some cases, the shutdowns became permanent, she said.
“Today, demand has recovered,” Watkins testified. “But refinery throughput has not yet caught up with the post-pandemic surge in demand.”
Sheffield of Pioneer Natural Resources offered a similar analysis. “Rising costs and prices are the natural result of increased demand from improving economic conditions post-pandemic,” he testified.