Oil executives were accused on Wednesday of “ripping off” consumers as Democrats in Washington tried to blame the country’s fuel producers for gasoline prices that have helped fuel US inflation.
The bosses of US supermajors ExxonMobil and Chevron, the American divisions of their European rivals BP and Shell, and leading shale drillers Pioneer Natural Resources and Devon Energy turned up virtually at a US House of Representatives committee hearing for a barbecue.
“At a time of record profits, Big Oil is refusing to increase production to give the American people much-needed relief at the pump,” said Frank Pallone, the Democratic chairman of the House Energy and Trade Committee.
Energy inflation has become a political burden for US President Joe Biden and the Democratic Party, which controls both houses of Congress. A recent Emerson College poll found that nearly 40 percent of Americans blame the Biden administration for the price of fuel — more than double that of oil and gas companies.
At $4.16 a gallon, the national average gasoline price is below recent record highs but is up about 75 percent since the president took office last year.
Industry executives denied they were gouging consumers, insisted prices were being set by forces beyond their control, and argued that Wall Street’s desire for financial returns and supply chain constraints were hampering a rapid increase in supply .
“We do not control the market price of crude oil or natural gas, nor of refined products such as gasoline and diesel fuel, and we do not tolerate price gouging,” Chevron chief executive Mike Wirth said at the hearing. “Fuel prices are influenced by factors that affect far more than one company or even one country.”
Both the oil industry and the Biden administration are limited in their ability to affect fuel prices immediately. Consumption has been strong as the economy emerges from the pandemic, while sanctions against Russia over its invasion of Ukraine threaten to limit its oil exports.
Analysts doubted subpoenaing oil executives to testify would lower prices. “It may make political sense, but it won’t be effective,” said Amy Myers Jaffe, director of the Climate Policy Lab at Tufts University’s Fletcher School.
Tom Kloza, global head of energy analysis at oil price service Opis, said it was “absolute bullshit” for the president and his party to shoulder the blame for the price hike. But with just over six months until the election, which could see Democrats lose control of both houses of Congress, the pressure to act is enormous.
Biden has tried to use the leverage at his disposal to drive prices down. He has leaned on US allies in the Gulf to increase production, to no avail. He has three times ordered the release of oil from US emergency reserves, the latest of which – a 180 million barrel injection over six months – was the largest ever.
The government has also urged domestic oil producers to increase supply, marking a sharp turning point from campaign rhetoric in which it promised to push a shift away from fossil fuels. Biden last week asked Congress to punish producers who sit on leases without drilling.
One option Biden has so far avoided is to urge Americans to reduce their oil consumption – even as the International Energy Agency called for measures such as driving restrictions, lower speed limits and restrictions on air travel.
Telling Americans to drive less could be politically damaging and evoke memories of the 1970s energy crisis, when Jimmy Carter sat in a cardigan urging the public to be “thrifty” and “waste less energy.”
“In a world of climate change and resource wars, it’s time to move away from the ‘we can’t be Jimmy Carter in a sweater’ mentality,” Jaffe said. “[But] this is their last resort — and it would take a lot of ground work to make it politically palatable.”
It’s also worth noting that speculators who buy energy contracts in futures markets have a lot to blame for staying out during the oil price rally. That was central to policy rhetoric as oil prices hit record highs in 2008, even after a government study found that supply and demand fundamentals, not speculation, were behind the surge.
Finally, in 2008, oil prices collapsed as the global financial crisis reduced global fuel demand.
“The Bush administration did not perform magic in 2008,” Kloza said, referring to then-President George W. Bush. “And I don’t think there are any magic levers to pull now.”
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