Executives from major oil companies defended themselves on Wednesday at a U.S. House hearing on high gasoline prices, as Democratic lawmakers asked pointed questions.
Democratic Rep. Diana DeGette of Colorado, who chairs the House Energy and Commerce Committee’s subcommittee on oversight and investigations, focused on how crude oil prices have dropped from a recent peak but gasoline prices haven’t retreated.
“Why are gas prices still high, even after crude-oil prices came down?” she asked the execs. “Why is there such a disconnect?”
“It is a very complex set of factors that impact the price of gasoline,” said BP
America’s president, David Lawler, in response.
“So for example, the price of oil that’s entering a refinery could have been purchased at a higher price, and therefore that price then flows through all the way to the station. It’s not necessarily an instantaneous market.”
Other execs testifying at the subcommittee’s hearing were Chevron
CEO Michael Wirth, ExxonMobil
CEO Darren Woods, Devon Energy
CEO Richard Muncrief and Pioneer Natural Resources
CEO Scott Sheffield, as well Shell
USA’s president, Gretchen Watkins.
“No single company sets the price of oil or gasoline,” ExxonMobil’s Woods said in his opening statement at the hearing, which was titled “Gouged at the Gas Station: Big Oil and America’s Pain at the Pump.”
“The market establishes the price based on available supply and the demand for that supply. Continued investments in new production is the only way to achieve balanced markets and more affordable prices that bring real relief at the pump. Government has a critical role to play here. Policies need to provide certainty and improved predictability.”
Woods also said ExxonMobil expects its total oil production this year will be the highest in 15 years.
Meanwhile, Democratic Rep. Frank Pallone of New Jersey warned the executives against “garbage” answers and appealed to their patriotism.
“I don’t want to hear that, ‘You know, we only do the wholesale prices. This is all done at the retail level.’ It’s a lot of garbage,” said Pallone, who chairs the House Energy and Commerce Committee, during his opening statement.
“The bottom line is you set the wholesale price, and that’s the biggest part of the retail price. So don’t tell us that you can’t do anything about it. You can do something about it, and we expect you to do that. Maybe it’s a matter of patriotism.”
During his question-and-answer period, Pallone asked the industry leaders to commit to both increasing production and reducing stock buybacks and dividend payments, but largely wasn’t able to get such a commitment on the buybacks and dividends.
U.S. drivers last month paid record-high prices for gasoline, as crude oil
spiked to its highest level in nearly 14 years following Russia’s invasion of Ukraine.
Market experts say while there may be some cases where consumers have been overcharged at the pump for the fuel
the main factor that drove retail gasoline prices to a record high in March was Russia’s invasion of Ukraine, coming during a tight global oil market. Oil demand has recovered quickly from COVID-19 lockdowns, outpacing supply growth.
See: Why U.S. motorists suspect price gouging at the pump — and how much service stations actually profit from a gallon of gas
Also read: What can Biden and Congress do to fight inflation? ‘Simply not much of anything’
“For Democrats, high energy
costs are a key political vulnerability in an election year; a plurality of voters blame the party in power for high gas prices, and with limited options to directly affect prices, the Democratic strategy is focused on shifting blame onto oil companies and investors,” said analysts at Eurasia Group in a recent note.
When Americans were asked in a recent Quinnipiac University poll what they think is most responsible for the rise in gasoline prices, 41% cited Biden’s economic policies, 24% blamed the war in Ukraine and sanctions against Russia, 24% pinned it on oil companies charging more, and 5% cited a rise in demand as the COVID pandemic eases.
Biden last week ordered the largest-ever release from the U.S. Strategic Petroleum Reserve, as his administration made an effort to address high gasoline prices and pin them in large part on Russian President Vladimir Putin’s decision to invade Ukraine.
Republicans, who are hoping to take back control of the House and Senate in November’s midterm elections, continued to focus during the hearing on blaming the recent elevated prices for gas and other necessities on Democratic policies that aren’t friendly to fossil fuels — as well as on Democratic spending measures, such as last year’s $1.9 trillion COVID relief package.
“President Biden and the majority Democrats should accept responsibility,” said Rep. Cathy McMorris Rodgers of Washington state, the committee’s top Republican. “This is not the Putin price hike, or the result of companies suddenly deciding to make money in 2022. This is the Biden price hike.”
dipped Wednesday, as traders assessed a fresh set of Western sanctions on Russia, while U.S. stocks
fell as the Federal Reserve was poised to give details for its plan to shrink its balance sheet.