Democrats accuse oil executives of ‘profiteering’ as war strains supplies

Congressional Democrats excoriated executives from some of the world’s biggest oil companies on Wednesday, accusing them of exploiting the war in Ukraine and a surge in crude prices to secure windfall profits. 

“Big oil is profiteering from our continued reliance on this volatile global commodity,” said Representative Frank Pallone, a Democrat from New Jersey who heads the House Committee on Energy and Commerce, at the start of a congressional hearing on the issue. “We’re here to get answers from the big oil companies about why they’re ripping off the American people at a time of record profits.”

The CEOs of six oil companies, including ExxonMobil Corp., and the US division of Shell Plc, are facing a grilling from a House energy investigations subcommittee, amid intensifying scrutiny of profits that have climbed along with the price of crude and gasoline. Polls show high pump prices and inflation are wearing on voters ahead of the November midterm elections, potentially jeopardising Democrats’ control of one or both chambers of Congress.

Oil executives argued they need the government’s help in lowering consumers’ gasoline costs, including by issuing more oil leases and drilling permits on federal land. They also took pains to emphasise their plans for boosting US production, by sinking more money into domestic projects and bringing on more rigs, though some of those increases are designed to offset declines elsewhere in their global portfolio.

Darren Woods, Exxon’s CEO, and Shell’s Gretchen Watkins, stressed in prepared testimony that their companies don’t own gasoline stations and therefore don’t set fuel prices. 

“Government plays a key role in this,” Woods said in written testimony. Effective federal permitting for oil companies to lease acreage, drill wells and build pipelines “will help spur further investment in US oil and gas production.”

Representative Morgan Griffith, a Republican from Virginia, said Democrats were deflecting blame that should be heaped on President Joe Biden for “his relentless pursuit of policies that discourage domestic energy production.” Early administration policies, including a pause on the sale of new federal drilling rights, signalled a desire to restrict domestic oil production that has sapped enthusiasm for new investment, he said.

The average cost of a gallon of unleaded gasoline is $4.16, according to the latest data from auto club AAA. Representative Diana DeGette, a Democrat from Colorado, highlighted the disconnect between the price of retail gasoline and oil, despite recent declines. The price of oil has come down, she said, “but the price at the pump is still near record highs.”

There is always a lag between movements in crude oil and pump prices as it takes time for costs to filter through the supply chain to gas stations. And pump prices typically respond much faster to climbing crude costs. 

“Some of our witnesses today have stated publicly that their focus is not on helping American families or on fuelling America’s economy — it’s enriching their shareholders,” said DeGette, who heads the House Energy and Commerce investigations subcommittee holding Wednesday’s hearing.

Exxon on Monday signalled its highest profit in 13 years, with first-quarter results expected to reach almost $11 billion, helping fuel Democrats’ accusations.

“Big oil is lining their pockets with one hand and taking billions in taxpayer subsidies with the other,” Pallone said. “The American people are getting ripped off as these companies choose to keep production low so that their own profits stay high.” Pallone insisted that oil companies should be pumping those profits into new drilling and production.

Exxon, Chevron Corp., BP Plc and Shell spent $44 billion on stock buybacks and dividends last year and have promised $32 billion to investors this year, according to a letter House Democrats sent Monday asking oil executives to suspend stock buybacks and dividends for the duration of the war in Ukraine.

Scott Sheffield, the CEO of Pioneer Natural Resources Co., told lawmakers that past overspending in shale production — which drove down prices — was unsustainable, leading to hundreds of bankruptcies. “The industry’s returns were dismal,” he said. “It became abundantly clear that for the industry to survive, the model of production growth at any cost needed to change.”

Exxon’s Woods highlighted how the industry weathered a steep drop in crude prices — which briefly went negative — after the pandemic caused demand to plummet. “Our industry sustained huge losses to the point many went out of business and cut back on their investments,” he said. “This reduction in investment laid the foundation for our current market and supply challenges.”

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