Oil industry executives said as demand dried up during the pandemic, companies slowed production. Returning to pre-pandemic levels is not simple, the executives said. (Photo by Sean Rayford/Getty Images)
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Democrats blamed the oil industry, Republicans blamed President Joe Biden and oil executives blamed global market forces at a U.S. House hearing Wednesday on how to reverse a dramatic increase in gas prices.
Over nearly six hours, members of the House Energy and Commerce Subcommittee on Oversight and Investigations and executives from six oil companies painted a complex picture of an industry reaping substantial profits, but still roiled by the pandemic, the war in Ukraine and federal regulations.
Democrats and Republicans also differed on possible solutions to high prices. Democrats called for moving away from oil and gas and toward renewable sources of energy.
“If this crisis has shown us anything, it’s why we as a country must work to break our addiction to oil as quickly as possible,” Subcommittee Chairwoman Diana DeGette, D-Colo., said.
“It’s reinforced the urgent and existential need to transition to a more sustainable energy future. For the sake of our economy, our environment and our national security, we must work as quickly as possible to go to that clean energy future.”
Republicans said the administration should reverse policies that made energy production more difficult. Subcommittee ranking Republican Morgan Griffith of Virginia said Biden’s first-week actions to cancel the Keystone XL crude oil pipeline and ban new oil and gas leases on federal lands discouraged domestic production.
Democratic Rep. Donald McEachin of Virginia said Republicans’ attack on the Keystone XL pipeline decision was off base because that pipeline wouldn’t even be in operation yet if it had been approved. It was also primarily planned to transport Canadian oil to overseas markets, doing little for the domestic supply, he said.
Republicans also attacked the Biden administration’s claim that Russian President Vladimir Putin’s attack on Ukraine — and the subsequent sanctions on Russia and disruptions to the global supply of oil — are responsible for the rise in gas prices.
“This was happening before Vladimir Putin’s unprovoked invasion of Ukraine,” U.S. Rep. Earl “Buddy” Carter, R-Ga., said.
Democrats slam big oil
Democrats on the panel chastised the companies for providing shareholder dividends and stock buybacks instead of reinvesting profits into more production or lowering prices.
DeGette noted crude oil had returned to the same price it was before Putin invaded Ukraine, yet gasoline remained 50 cents per gallon higher than it was in late February.
Meanwhile, the six companies represented at the hearing, bp America, Chevron, Devon Energy, ExxonMobil, Pioneer and Natural Resources Co. and Shell USA, recorded $75 billion in profits in 2021.
“Something doesn’t add up,” DeGette said.
Executives for major oil producers said individual gas stations — not the oil companies — set retail gas prices. Most gas stations, even those carrying a large company’s brand, are independently owned and operated.
“No single company sets the price of oil or gasoline,” ExxonMobil CEO Darren W. Woods said. “The market establishes the price based on available supply and the demand for that supply.”
“This committee is not going to sit back and allow this system, which forces American taxpayers to pay oil companies out of both pockets — first at the pump and then again through tax breaks — to continue in its current form.”
– Rep. Diana DeGette, D-Colo.
Full committee Chairman Frank Pallone, a New Jersey Democrat, rejected that argument.
“The bottom line is you set the wholesale price and that’s the biggest part of the real retail price,” he said. “So don’t tell us that you can’t do anything about it. You can do something about it. And we expect you to do that. Maybe it’s a matter of patriotism.”
Several Democrats on the panel raised the prospect of reducing tax subsidies to energy companies, though the Ways and Means Committee is the primary House panel for tax law changes.
“This committee is not going to sit back and allow this system, which forces American taxpayers to pay oil companies out of both pockets — first at the pump and then again through tax breaks — to continue in its current form,” DeGette said.
Chevron Chairman and CEO Michael K. Wirth said his company was providing both shareholder payments and increased production.
“We’re investing more capital to grow production,” Wirth said. “We can do that and return value to shareholders. They’re not mutually exclusive.”
Production was also hurt by industry changes during the economic slowdown caused by the coronavirus pandemic. As demand dried up, companies slowed production. Returning to pre-pandemic levels is not simple, the executives said.
GOP blames climate action
Republicans on the panel said Democrats who now blast the industry for not producing enough had previously called for ending fossil fuel production.
Biden campaigned on climate pledges to move away from fossil fuel.
“President Biden walked in on day one with an agenda to kill American energy,” House Minority Whip Steve Scalise said.
The Louisiana Republican then asked the executives if federal regulations made it harder to produce oil.
Wirth, Scott Sheffield of Pioneer and Richard E. Moncrief of Devon all said regulations did make their business harder. Gretchen Watkins, Shell USA’s president, said some regulations were necessary, but that Shell was waiting on outstanding federal permits.
McEachin also asked each executive if a potential suspension of the 18.3 cents-per-gallon federal gas tax would translate to savings for consumers.
The executives responded that they would not collect the tax, but that the price of oil is not predictable, and they could not guarantee an exact price drop to match any tax waiver.
“What I’m trying to do is disabuse the American public of this myth that if we do something like declare a federal tax holiday that the price of gasoline will go down,” McEachin said. “We don’t know what’s going to happen.”
Instead of a gas tax holiday, Congress should provide direct payments to help cover the cost of more expensive gas, he said.
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