By Timothy Gardner and Liz Hampton
WASHINGTON (Reuters) – Oil executives defended themselves in the U.S. Congress on Wednesday from charges by lawmakers that they are gouging Americans with high fuel prices, saying that they are boosting energy output and no one company sets the price of gasoline.
Lawmakers in the U.S. House of Representatives Energy and Commerce Subcommittee on Oversight and Investigations held the hearing to grill companies on why gasoline prices remain elevated even though prices for crude oil, the feedstock for fuels, have dropped.
U.S. gasoline prices have surged since Russia’s invasion of Ukraine in February and after Western countries slapped sanctions on Moscow’s energy exports. Pump prices hit a record, before inflation adjustments, of $4.33 a gallon on March 11, and since then have slipped about 4% to $4.16 a gallon on Wednesday, according to the AAA motorist group.
In the same time frame, U.S. gasoline futures have fallen more than 7% to $3.07 a gallon as international crude prices <LCOc1> have dropped more steeply, about 8%, to about $103.70 a barrel.
“One of the things that has confused me … and it’s making people mad, is why are gas prices still high?” said U.S. Representative Diana DeGette, a Democrat and chair of the subcommittee. “These prices are constraining our constituents’ budgets and patience.” (Graphic: The gap between retail and wholesale gasoline costs – https://fingfx.thomsonreuters.com/gfx/ce/mopanlbzdva/Pasted%20image%201637167261249.png)
Executives from Exxon Mobil Corp, Chevron Corp, BP America, Shell USA, Devon Energy Corp and Pioneer Natural Resources Co testified virtually, despite DeGette’s invitations to do so in person.
Chevron’s Chief Executive Mike Wirth said fuel prices are set by market dynamics that companies have little control over.
“Changes in the price of crude oil do not always result in immediate changes at the pump,” Wirth said, adding that “it frequently takes more time for competition among retail stations to bring prices back down at the pump.”
U.S. President Joe Biden has been struggling to tackle rising consumer prices at the pumps and at grocery stores, a vulnerability for his fellow Democrats as they seek to maintain razor-thin majorities in both chambers of Congress in the Nov. 8 elections.
The Biden administration’s sanctions on Moscow include a U.S. ban on Russian energy imports and the president has said the higher fuel prices result partially from Russia’s invasion.
Biden last week urged oil companies to boost output and service American families instead of investors, as he announced a record release of crude oil from strategic reserves.
Republicans, including U.S. Representative Morgan Griffith, blamed for high pump prices on Biden’s policies, including a decision to revoke a key permit for the Keystone XL pipeline that would have imported crude from Canada.
“It is impossible to generate confidence or invest in production today when future production is clearly being blocked by this administration,” Griffith said. Democrats have said oil companies are sitting on thousands of leases to drill on public lands.
DeGette questioned the billions of dollars in profits earned by the companies, and cited $30 billion in taxpayer subsidies they receive as a reason they should help lower gasoline prices.
Wirth restated Chevron’s plans to boost capital expenditure this year by 50%, with about half going to increasing oil and gas output and half to renewable fuels and lower-carbon energy.
Gretchen Watkins, president of Shell USA, said her company neither controls or owns the 13,000 gas stations that carry its brand. “Each of these independent businesses is responsible for setting the local retail price of gasoline.”
Exxon, the top U.S. oil company, on Monday said first-quarter results could top a seven-year quarterly record. Other oil company earnings could also surge after Russia’s invasion pushed up energy prices.
“No single company sets the price of oil or gasoline,” said Darren Woods, chairman and CEO of Exxon. “The market establishes the price based on available supply, and the demand for that supply.”
Pioneer CEO Scott Sheffield said it would take time to rev up the company’s production in the Permian Basin, citing worker and supply chain shortages and the decommissioning of many rigs and hydraulic fracturing fleets when prices were low in 2020.
(Reporting by Timothy Gardner, David Shepardson in Washington, Liz Hampton in Denver and Sabrina Valle in Houston; editing by Richard Pullin, Jonathan Oatis, David Gregorio and Marguerita Choy)