Oil executives speak on high gas prices at House hearing

WASHINGTON — Amid a whirlwind of partisan pointing about who is responsible for rising energy prices, executives of six major oil and gas companies defended themselves on Wednesday against criticism that they are seeking to boost corporate profits. companies by refusing to produce more oil and gas.

They appeared before a House committee as high gas prices became a central issue ahead of the midterm elections in November. Republicans blamed the Biden administration’s regulations and environmental policies for energy production shortfalls, while Democrats questioned why companies couldn’t lower gasoline prices when oil prices have declined somewhat since peaking after Russia invaded Ukraine.

Trying to sidestep the political debate, the leaders said they were not indulging in price gouging and were simply reacting to global commodity prices that were beyond their control. They also said they were working to switch to cleaner energy.

“We’re here to get answers from big oil companies on why they’re ripping off the American people,” Rep. Frank Pallone Jr., a New Jersey Democrat and chairman of the Energy and Commerce Committee, said during the meeting. of the hearing. “In an era of record profits, Big Oil refuses to increase production.”

Oil executives opposed the Democrats’ accusations, but remained tight-lipped in their responses.

“Because oil is a global commodity, Shell does not set or control the price of crude oil,” Gretchen H. Watkins, president of Shell USA, told the committee in her prepared remarks. “The current crisis and the pressure on the supply and prices of hydrocarbons reveal the urgency of accelerating the energy transition.”

Michael Wirth, chief executive of Chevron, insisted the company had “zero tolerance for price gouging”.

With his approval ratings falling to a new low as inflation remained elevated for months, President Biden struggled to explain rising gas prices to the American people. In an attempt to capitalize on broad support for crippling sanctions on Russia, the administration has tried to label the recent gasoline price hike as “Putin’s price hike.”

But Republicans tried to hang the increase around the president’s neck, noting that the price of gas had been rising for a year, long before Mr Putin invaded Ukraine. They used concern over rising gas prices as the main argument with voters about the need for a change in leadership.

Republicans have hammered Mr. Biden for his cancellation of permits for the Keystone XL pipeline, as well as pauses on new oil well leases on federal lands. White House officials have tried to explain that none of these policies are responsible for the rise in gasoline prices.

In reality, the easing of pandemic restrictions has increased gas demand while supply is not growing fast enough. Both supply and demand are driven by factors beyond the control of Mr. Biden and Congress.

Still, the attacks seem to be working. In a recent Quinnipiac University poll, only 24% of respondents said they believed rising gas prices were the result of the war in Ukraine, with more Americans blaming politicians of the Biden administration.

A recent NBC News poll showed that despite broad support for banning Russian oil imports, the majority of Americans were still concerned about gas prices. Polls showed Mr Biden’s approval rating near the lowest of his presidency, at around 40%, suggesting Americans hold him accountable even as they support some of his foreign policies.

Some Democrats facing competitive races in November have pushed to suspend the federal gas tax until the end of the year. But Republicans quickly rejected the proposal, calling it a desperate attempt to appeal to voters.

Progressives have also attempted to use soaring energy and gas prices to incentivize clean energy investment to reduce dependence on foreign authoritarian rulers and oil companies. The United Nations Intergovernmental Panel on Climate Change said in a report released this week that the world must dramatically accelerate efforts to reduce greenhouse gas emissions from oil and other fossil fuels. to limit global warming to 1.5 degrees Celsius, or 2.7 degrees Fahrenheit.

During Wednesday’s hearing, Republicans sought to take advantage of Mr. Biden’s weak position.

“It’s not Putin’s price hike,” said Rep. Cathy McMorris Rodgers, a Republican from Washington. “It’s Biden’s price hike. It’s been a steady climb since he took office. She said the Democrats are looking for another scapegoat by blaming the oil industry.

Ms Rodgers and other Republicans criticized what they called the administration’s efforts to ease oil sanctions on Venezuela and Iran to boost global oil supplies, as well as the decision to block the Keystone XL pipeline, which would have imported more Canadian oil sands production from that country. .

The average price of a gallon of gasoline is about $1.30 higher than it was a year ago, rising in line with oil prices, which are now just below $100 a barrel.

Democrats have called on oil executives to halt dividend increases and stock buybacks and invest more in developing alternative energy and lowering gasoline prices. They said their constituents were hurting and growing upset with oil companies because of rising prices.

Last week, Mr Biden said some oil companies had increased production, but added that “too many companies are not doing their part and choosing to make extraordinary profits and without making additional investments to help to supply”.

Outrage over oil company profits is not unusual. Politicians often criticize the energy industry for its profits when gasoline prices rise, then quietly drop their complaints when prices fall. Over the past 15 years, oil and gas prices have risen and fallen in three major cycles.

More recently, energy demand has recovered quickly after the lull of the first pandemic as vaccines became widely available and the crush of infections receded. But global oil production has not fully returned to pre-pandemic levels. U.S. production is just under 12 million barrels a day, about a million less than the record set just before the pandemic. With oil companies adding rigs, the Energy Department expects U.S. production to top 13 million barrels next year.

As Mr Biden urges oil companies to increase production, Wall Street investors tell them to be more careful because they don’t want companies drilling up a storm when prices are high only to lose money when prices are high. prices fall again. This is what happened between 2011 and 2015, resulting in dozens of bankruptcies.

Right now, the oil companies are making record profits. Exxon Mobil said this week that its profits in the first three months of the year could total $11 billion, the most the company has made in a quarter since 2008, when the price of oil topped $140 a barrel.

Exxon has cut spending and its workforce in recent years, while ramping up production in the Permian Basin, which straddles Texas and New Mexico, and offshore Guyana. Darren Woods, the company’s chief executive and one of the witnesses at Wednesday’s hearing, insisted that Exxon is working to reduce its greenhouse gas emissions while meeting the nation’s energy needs. , but that it is not responsible for the price increase.

“Uncertainty of supply in a tight market with growing demand is driving significant price volatility – which is what we’re seeing today,” Woods told the committee.

Scott D. Sheffield, chief executive of Pioneer Natural Resources, a major Texas producer, said there was little his company and others could do to quickly ramp up production.

“I understand the desire to find a quick fix to the recent spike in gasoline prices,” he said, “but neither Pioneer nor any other American producer can increase production overnight by opening a faucet”. He noted that labor and drilling equipment shortages and inflationary pressures on oil services have hampered production increases.

Comments are closed.