Big Oil chief executives rejected accusations from lawmakers that they were profiteering from excessive retail fuel prices during a Congressional hearing this week.
Dubbed "Gouged at the Gas Station: Big Oil and America's Pain at the Pump," the hearing at the House Energy and Commerce Committee was from the start targeting Big Oil as the culprits behind average national gasoline prices of over $4 per gallon.
"We will not sit back and allow the fossil-fuel industry to take advantage of the American people and gouge them at the pump," the WSJ quoted Colorado Rep. Diana DeGette, chair of the House committee, as saying ahead of the hearing.
Big Oil, however, rejected the accusations. They shot back at the committee by saying prices were higher because of the war in Ukraine as well as restrictive U.S. energy policies, the Wall Street Journal reported following the hearing. Supply-chain shortages also weighed the industry down, the executives said.
"It [the U.S. oil industry] is experiencing severe cost inflation, a labor shortage due to three downturns in 12 years, shortages of drilling rigs, frack fleets, frack sand, steel pipe, and other equipment and materials," said Scott Sheffield, the chief executive of Pioneer Natural Resources. "We can't grow faster," he added.
Republicans sided with Big Oil in blaming federal government policies for current oil production levels.
"We need to look for ways to increase our domestic production and our export capacity," said Rep. Morgan Griffith from Virginia. "We need energy policy that promotes energy security while also taking advantage of America's abundant energy resources."
Accused by chairwoman DeGette that oil companies were "looking at your shareholder profits," the executives explained that oil producers such as themselves do not have control over retail fuel prices. They added that final retail fuel prices are the result of more than one factor, namely crude oil prices, which explained why prices at the pump did not fall in tune with crude oil prices.
"We do not control the price of crude oil or natural gas, nor of refined products like gasoline and diesel fuel," Mike Wirth, the chief executive of Chevron. "And we have no tolerance for price gouging."
By Charles Kennedy for Oilprice.com
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Comments
It is a fact that Big Oil is in the global oil business because the oil industry is the most lucrative industry in the world. And to enhance the return on its investments, Big Oil tries to maximize its production to take advantage of higher crude prices. It benefits when oil prices are on the rise and it loses when oil prices are on the decline.
Furthermore, neither Big Oil nor the Biden administration or anybody else can control prices. They are first and foremost determined by supply and demand and additional factors such as investments and geopolitical factors.
Rising gasoline prices in the United States are being pushed upwards by global crude prices and an accelerating inflation which has already hit 8.3%.
Underinvestment in oil and gas since 2019 was the one single factor behind the rise in prices because it made the global oil market tight and caused global spare production capacity including OPEC+ to shrink since. Therefore we can expect continued higher prices for at least the next five years until new investments in oil and gas reach fruition.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London