Top oil company executives wrangled with House lawmakers Wednesday over high gasoline prices, rejecting claims by Democrats that they are taking advantage of a global crisis to gouge consumers.
Over a six-hour hearing, Democrats on a House oversight panel castigated executives from Exxon Mobil Corp., Chevron Corp. and other oil giants for raking in historically high profits while slowing their investment in U.S. production.
The company leaders countered that prices were driven by Russia’s invasion of Ukraine, restrictive U.S. energy policies and supply-chain shortages slowing down the industry.
“It 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, chief executive of Pioneer Natural Resources Co., one of the largest U.S. independent oil and gas producers.
“We can’t grow faster," he said.
The hearing before a House Energy and Commerce subcommittee, in which the executives appeared via video links, was the latest skirmish over who bears responsibility for pump prices that lingered at record highs throughout March.
The issue has taken on added significance ahead of congressional midterm elections in November, with polls showing many Americans are concerned over how the Biden administration has overseen the economy.
The committee’s Republicans sought to place blame for high prices on President Biden’s energy policy, including his decision to impose a temporary pause on new oil and gas leases on federal land and his revocation of a permit for the Keystone XL pipeline to carry more oil from Canada.
“We need to look for ways to increase our domestic production and our export capacity," said Rep. Morgan Griffith (R., Va.). “We need energy policy that promotes energy security while also taking advantage of America’s abundant energy resources."
Democrats said oil companies have an obligation to do more for Americans and threatened to revoke tax breaks they get to encourage their production.
“Now it’s time for Congress to alleviate the pain many Americans are feeling at the pump," said Rep. Diana DeGette (D., Colo.). “We have the capacity right now. The reason why your companies aren’t doing it, as you freely and honestly admitted, is because you’re looking at your shareholder profits."
Ms. DeGette challenged the executives to explain why retail gasoline prices are down just 3.2% from last month’s highs, while crude futures are down more than 20% from recent highs.
The oil executives said pump prices are set by retailers, and that prices are a result of several factors including local wages and other operating costs.
“We do not control the price of crude oil or natural gas, nor of refined products like gasoline and diesel fuel," Chevron CEO Mike Wirth said. “And we have no tolerance for price gouging."
Democrats also said the oil executives were giving priority to payouts to their shareholders over reinvesting in oil production.
They cited a survey last month from the Federal Reserve Bank of Dallas, in which half of the big companies that responded said they didn’t intend to increase output by more than 5% this year despite higher oil prices. Most respondents cited investor pressure as the top factor limiting their growth.
Rep. Frank Pallone (D., N.J.), chairman of the full Energy and Commerce Committee, said the six oil companies represented at the hearing, which also included BP PLC and Shell PLC, together issued about $40 billion in dividends last year and have executed or announced $45 billion in share buyback programs in 2021 and 2022.
“Now that’s a lot of money to shareholders but it’s coming at the expense of the American people, who need you to dramatically increase production, not shareholder wealth," Mr. Pallone said.
He asked the executives whether they would commit to both raising output and slashing dividends and buybacks, in a bid to help curb fuel prices. Most said their companies were working to raise production, but none offered to cut dividends or buybacks.
“We think we can return value to our shareholders, as well as increase production, as well as invest for the future in renewables, low- and no-carbon fuels for our customers," said Gretchen Watkins, president of Shell USA Inc. “We will be doing all of that."
Mr. Wirth said Chevron is increasing capital investments substantially this year over last and that it can increase output while also returning capital to shareholders.
Pioneer and Devon Energy Corp., whose chief executive Richard Muncrief also testified before the panel, had earlier this year reported their highest annual profits in more than a decade.
Exxon reported $23 billion and Chevron reported nearly $16 billion in net income for 2021, both their most profitable years since 2014.
Exxon CEO Darren Woods noted his company lost about $22 billion in 2020, while Mr. Wirth said Chevron lost about $5.5 billion that year, both the biggest annual losses since at least 1980, according to FactSet.
Democrats urged the oil companies to invest more in moving to cleaner fuels to end dependency on oil.
Pioneer’s Mr. Sheffield countered that without years of debate and court fights, the Keystone XL pipeline would have been ready today to connect Gulf Coast refiners with more Canadian oil. Rep. David McKinley (R., W.Va.) cited a Wall Street Journal report that the Biden administration is scrambling for ways to bring more Canadian crude into the U.S., but without reviving the pipeline project.
Mr. Biden revoked Keystone XL’s permit on his first day as president, eventually leading its developers to abandon the project. Mr. McKinley said that was a mistake, and that oil and gas investment has been discouraged by Mr. Biden’s stated intent to transition the U.S. away from fossil fuels.
“No wonder the market is nervous and prices have increased," Mr. McKinley said.
The Biden administration contends that oil companies are sitting on more than 12 million acres of leased, non-producing federal land with 9,000 approved but unused permits for production.
It wants to pressure oil companies to begin pumping on that land by asking Congress to place a fee on permitted land where no drilling is taking place.
Oil executives said they need to have an inventory of leases and permits to keep churning through.
Devon’s Mr. Muncrief said that it takes time to collect supplemental permits for rights of way for pipelines, roads and water disposal, and that supply chain problems out of their control has delayed the time between securing an initial permit and beginning to drill in the Delaware basin to “closer to six months," up from about one month before.
This story has been published from a wire agency feed without modifications to the text
