House Democrats charged the oil industry with unethically profiting from the war in Ukraine and criticized it for spending too little on new production during a tense hearing on gasoline prices Wednesday.
The House Energy and Commerce Committee hosted leading oil executives to answer Democrats’ allegations that they’re gouging drivers, as well as wrongly favoring company profits with stock buybacks and bigger shareholder returns, rather than trying to get new oil to market.
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DAILY ON ENERGY: THREAT OF RUSSIAN GAS CUTOFF WEIGHING HEAVILY ON EUROPEANS
Chairman Frank Pallone said the oil companies represented, including BP, Shell, Chevron, and ExxonMobil, as well as independent producers Devon Energy and Pioneer Natural Resources, are “all ripping off the American people” and said they should spend more on oil production, even while Democrats stress a need to move away from fossil fuels altogether.
“Even in the face of a devastating war in Ukraine and a bipartisan agreement to ban the import of Russian oil, several of the companies testifying today told their shareholders that they would rather make money off high prices in the market than invest in additional oil production,” Pallone also said in his opening statement.
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Vermont Rep. Peter Welch, who is running for the retiring Sen. Patrick Leahy’s seat, said, “There could be a decision about the allocation of the resources of the company” that favors more production rather than buybacks and better dividends.
“You have a decision with the profit. You put it into stock buybacks, that helps shareholders. You put it into dividends, it helps shareholders,” he said. “Or you put it into production, and possibly, under these extreme circumstances with a war — with people dying in Ukraine — you say, ‘You know what, maybe we’ll lighten up a little bit on the stock buybacks, maybe we’ll lighten up a little bit on the dividends, and maybe we lighten up a little bit to help folks in Vermont who are getting hammered with the price at the pump.”
Oil demand has skyrocketed back from the pandemic lows, which cost the industry billions and drove down production, and the disruption to the oil market caused by the war in Ukraine has driven prices up further.
Heads of a number of energy companies have stated publicly that “capital discipline” and returning earnings to shareholders are central to their operational strategies this year after a tough few years for the industry.
“We have no need and no intent to invest in production growth this year,” Occidental Petroleum President and CEO Vicki Hollub said in a shareholder call in February. The company will prioritize debt reduction and shareholder interests, Hollub said.
Others, however, have said they are investing more in production, with U.S. benchmark crude oil trading more than 70% higher than the same time last year.
“We’re investing more capital to grow production,” Chevron Chairman and CEO Mike Wirth said in response to Welch’s questioning on Wednesday. “We can do that and return value to shareholders. They’re not mutually exclusive.”
Numerous high-ranking Biden administration officials have said producers need to increase output to alleviate the strain of high prices, though their primary motivation on energy policy is to increase green technologies and reduce fossil fuel use over the long-term.
At the same time, President Joe Biden’s environmentalist constituencies are pressuring investors to stay away from fossil fuels and demanding stronger financial regulations to sway investing away from oil, gas, and coal.
The Securities and Exchange Commission recently introduced a proposal that would require all public companies to disclose their greenhouse gas emissions footprints, among other things, in a rule designed to illustrate climate change-related risks associated with firms.
The oil industry, meanwhile, has argued it needs longer-term certainty that its investments won’t be compromised by additional regulations that discourage new and existing production. Numerous industry players have cited policies like the SEC proposed rule and the Biden administration’s initial rollback and subsequent slow-walking of the federal oil and gas leasing program as crimping investment and production.
While gasoline prices have fallen from the heights reached shortly after Russia invaded Ukraine, they still remain among their highest on record.
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At least 20 states have introduced gas tax holiday bills designed to help bring down prices.
