Oil executives were accused of “ripping off” consumers on Wednesday, as Democrats in Washington tried to pin blame on the country’s fuel producers for petrol prices that have helped stoke US inflation.
The heads of US supermajors ExxonMobil and Chevron, the American divisions of their European rivals BP and Shell and leading shale drillers Pioneer Natural Resources and Devon Energy appeared virtually at a hearing of a US House of Representatives committee to be grilled.
“At a time of record profits, Big Oil is refusing to increase production to provide the American people some much-needed relief at the gas pump,” said Frank Pallone, the Democratic chair of the House Energy and Commerce Committee.
Energy inflation has become a political liability for US President Joe Biden and the Democratic party that controls both houses of Congress. A recent poll by Emerson College found that nearly 40 per cent of Americans blame the Biden administration for the price of fuel — more than double the proportion that blame oil and gas companies.
At $4.16 a gallon, the national average petrol price is down from recent record highs but remains up by around 75 per cent since the president took office last year.
Industry executives denied they were gouging consumers, insisting that prices were set by forces beyond their control, and arguing that Wall Street’s desire for financial returns and constraints in the supply chain were hindering rapid supply increases.
“We do not control the market price of crude oil or natural gas, nor of refined products like gasoline and diesel fuel, and we have no tolerance for price gouging,” Mike Wirth, Chevron’s chief executive, told the hearing. “Fuel prices are impacted by factors that involve far more than one company or even one country.”
The oil industry and the Biden administration are both limited in their power to immediately sway fuel prices. Consumption has been strong as the economy emerges from the pandemic, while sanctions on Russia over its invasion of Ukraine threaten to curtail its oil exports.
Analysts doubted that summoning oil executives to testify would lower prices. “It might be politically expedient, but it won’t be effective,” said Amy Myers Jaffe, head of the Climate Policy Lab at Tufts University’s Fletcher School.
Tom Kloza, global head of energy analysis at oil pricing service Opis said it was “absolutely a bum rap” that the president and his party were shouldering the blame for the price rise. But with little over six months until elections in which the Democrats could lose control of both congressional chambers, there is huge pressure to take action.
Biden has sought to pull what levers he has at his disposal to bring down prices. He has leaned on US allies in the Gulf to raise output, to little avail. He has ordered the release of oil from US emergency reserves three times, the most recent of which — a 180mn barrel injection over six months — was the biggest ever.
The administration has also pushed domestic oil producers to increase supply, marking a sharp pivot from campaign rhetoric in which he promised to lead a shift away from fossil fuels. Biden last week called on Congress to fine producers who sit on leases without drilling.
One option Biden has so far avoided is asking Americans to cut down their oil use — even as the International Energy Agency called for measures such as driving restrictions, lower speed limits and curbs on air travel.
Telling Americans to drive less could be politically damaging, bringing back memories of the energy crisis of the 1970s, when Jimmy Carter sat in a cardigan calling on the public to act “thriftily” and “waste less energy”.
“In a world of climate change and resource wars, it’s time to move away from the ‘we can’t be Jimmy Carter in a sweater’ mentality,” said Jaffe. “[But] that’s their last lever — and it would take a lot of ground work to make it politically palatable.”
Also notable by its absence during the oil price rally is much blame on speculators buying energy contracts in futures markets. That was central to political rhetoric when oil prices hit records in 2008, even after a government study found that supply and demand fundamentals, not speculation, were behind that surge.
In 2008, oil prices eventually plummeted when the global financial crisis cut world fuel demand.
“There was no magic that was delivered by the Bush administration in 2008,” said Kloza, referring to George W Bush who was president at the time. “And I don’t think there’s any magical levers to pull now.”