Democrats accuse oil executives of exploiting war to secure 'record profits'

Shell and Exxon CEOs argue oil companies don't set petrol prices at the pump

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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 Frank Pallone, a Democratic representative 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 chief executives of six oil companies, including Exxon Mobil Corp., and the US division of Shell Plc, faced a grilling from a House Energy Investigations subcommittee, amid intensifying scrutiny of profits that have climbed along with the price of crude and gasoline.

Oil executives argued they need the government’s help in lowering consumers’ petrol 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 chief executive, and Shell’s Gretchen Watkins, stressed in prepared testimony that their companies don’t own gasoline stations and therefore don’t set petrol prices.

“Government plays a key role in this,” Mr 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".

Morgan Griffith, Republican Representative 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”.

The average cost of a gallon of unleaded gasoline is $4.16, according to the latest data from auto club AAA.

Diana DeGette, a Democratic representative 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 Ms 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,” Mr Pallone said.

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

Scott Sheffield, the chief executive 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.”

Updated: April 06, 2022, 7:21 PM