May 26, 2022

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US lawmakers criticize major oil companies for high gasoline prices

US lawmakers criticize major oil companies for high gasoline prices

Gasoline leaks from a nozzle carried by a gas station mechanic in Somerville, Massachusetts, US, March 7, 2022. REUTERS/Brian Snyder/File Photo

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Oil executives defended themselves in the US Congress on Wednesday from accusations from lawmakers that they are deceiving Americans with high fuel prices, saying they are boosting energy production and no single company sets the price of gasoline.

Lawmakers on the US House of Representatives Energy and Commerce Subcommittee held a hearing to question companies about why gasoline prices have continued to rise despite lower prices for crude oil, the fuel feedstock.

US gasoline prices have risen since Russia’s invasion of Ukraine in February and after Western countries imposed sanctions on Moscow’s energy exports. Pump prices hit a record, before inflation adjustments, at $4.33 a gallon on March 11, and have since fallen about 4% to $4.16 a gallon on Wednesday, according to AAA Motorists Group.

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In the same time frame, US gasoline futures fell more than 7% to $3.07 a gallon with global crude oil prices. It fell sharply, about 8%, to about $103.70 a barrel.

“One of the things that confused me… It pisses people off, why are gas prices still so high?” U.S. Representative Diana Diggett, a Democrat and chair of the subcommittee, said. “These prices restrict our voters’ budgets and patience.”

Gasoline’s retail prices exceed wholesale costs due to refining, transportation, marketing, and taxes, and the gap between the two tends to fluctuate – as retail prices often fall more slowly.

Executives from Exxon Mobil Corp (XOM.N)Chevron Corporation (XOM.N)BP America (BP.L)Shell USA, Devon Energy Corp. (DVN.N) Pioneer Natural Resources Inc (PXD.N) He testified virtually, despite DeGette’s calls to do so in person.

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Chevron CEO Mike Wirth said fuel prices are determined by market dynamics over which companies have little control.

“Changes in crude oil prices do not always lead to immediate changes at the pump,” Wirth said, adding that “competition between retail stations often takes longer to bring prices down back at the pump.”

US President Joe Biden has been struggling to tackle rising consumer prices at pumps and in grocery stores, a vulnerability for his fellow Democrats as they seek to maintain razor-thin majorities in both houses of Congress in the November 8 elections.

The Biden administration’s sanctions on Moscow include a US ban on Russian energy imports, and the president has said high fuel prices are partly caused by the Russian invasion.

Biden last week urged oil companies to increase production and serve American families rather than investors, as he announced a record release of crude oil from strategic reserves. Read more

Republicans, including US Representative Morgan Griffiths, blamed higher pump prices on Biden’s policies, including the decision to revoke a major permit for the Keystone XL pipeline that would have imported crude from Canada.

“It is impossible to generate confidence or investment in production today when this administration is clearly blocking future production,” Griffiths said. Democrats said oil companies are working on thousands of leases to explore for public lands.

DeGette questioned the companies’ billions of dollars in profits, citing the $30 billion in taxpayer subsidies they receive as a reason they should help lower gasoline prices.

Wirth reiterated Chevron’s plans to increase capital spending this year by 50%, with about half going to increase oil and gas production and the other half to renewable fuels and low-carbon energy.

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Gretchen Watkins, president of Shell USA, said her company does not control or own 13,000 branded gas stations. “Each of these independent companies is responsible for setting the local retail price of gasoline.”

Exxon, the largest US oil company, said Monday that its first-quarter results may surpass the quarterly record in seven years. Profits for other oil companies could also rise after the Russian invasion drove up energy prices. Read more

“No single company sets the price of oil or gasoline,” said Darren Woods, Exxon’s chairman and CEO. “The market sets the price based on the available supply and the demand for that supply.”

It will take some time to ramp up the company’s production in the Permian Basin, Pioneer CEO Scott Sheffield said, citing labor and supply chain shortages and the decommissioning of many rigs and hydraulic fracturing fleets when prices were low in 2020.

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Additional reporting by Timothy Gardner and David Shepardson in Washington, Liz Hampton in Denver and Sabrina Valley in Houston; Editing by Richard Boleyn, Jonathan Otis, David Gregorio and Margarita Choi

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