June 28, 2022

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Top oil officials defend high fuel prices at a hearing in the US Congress

Top oil officials defend high fuel prices at a hearing in the US Congress

Gasoline leaks from a nozzle carried by a gas station mechanic in Somerville, Massachusetts, US, March 7, 2022. REUTERS/Brian Snyder/File Photo

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Oil executives defended themselves in the US Congress on Wednesday from accusations from lawmakers that they are deceiving Americans with high fuel prices, saying they are boosting energy production and no single company sets the price of gasoline.

Lawmakers at the US House of Representatives Energy and Commerce Subcommittee on Oversight and Investigations are holding a hearing to question companies about why gasoline prices have continued to rise despite lower prices for crude oil, the fuel feedstock.

Gasoline prices rose in the United States after Russia invaded Ukraine and Western countries imposed sanctions on Moscow’s energy exports. Pump prices hit a record high before inflation adjustments of $4.33 a gallon on March 11, and have since fallen about 4% to $4.17 a gallon on Wednesday, according to the AAA Motorists Group.

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Global crude oil prices have fallen more sharply, from a peak of more than $139 a barrel in early March to around $107 on Tuesday, down 23%, and incomplete gasoline futures are down about 15%. (graphic: Gap retail and wholesale)

“These prices restrict our voter budgets and patience,” US Representative Diana Diggett, a Democrat and chair of the subcommittee, said at the start of the hearing.

CEOs of ExxonMobil (XOM.N)Chevron (XOM.N)BP America (BP.L)Shell USA, Devon Energy Corp. (DVN.N) Pioneer Natural Resources Inc (PXD.N)Witness.

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DeGette questioned the billions of dollars in profits made by the companies present at the session, and cited the $30 billion in taxpayer subsidies they receive as a reason they should help lower gasoline prices.

Republican representatives at the hearing, including U.S. Representative Morgan Griffith of Virginia and Representative Kathy McMorris Rodgers of Washington, blamed President Joe Biden’s policies regarding pump price hikes, including the decision to revoke a major permit for the Keystone XL pipeline.

“It is impossible to generate confidence or investment in production today when this administration is clearly blocking future production,” Griffiths said.

Chevron CEO Mike Wirth said fuel prices are determined by market dynamics over which companies have little control.

“Changes in crude oil prices do not always lead to immediate changes at the pump,” Wirth said, adding that “competition between retail stations often takes longer to bring prices down back at the pump.”

Biden, a Democrat, urged oil companies last week to increase production and serve American families rather than investors, as he announced a record release of oil from strategic reserves. Read more

Wirth reiterated Chevron’s plans to increase capital spending this year by 50%, with about half going to increase oil and gas production and the other half to renewable fuels and low-carbon energy.

Exxon, the largest US oil company, said Monday that its first-quarter results may surpass the quarterly record in seven years. Profits for other oil companies could also rise after the Russian invasion drove up energy prices. Read more

“No single company sets the price of oil or gasoline,” said Darren Woods, Exxon Chairman and CEO. “The market sets the price based on the available supply and the demand for that supply.”

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Gretchen Watkins, president of Shell USA, said her company does not control or own 13,000 branded gas stations. “Each of these independent companies is responsible for setting the local retail price of gasoline.”

It will take some time for the company to ramp up production in the Permian Basin, Pioneer CEO Scott Sheffield said, citing labor and supply chain shortages and the decommissioning of many rigs and hydraulic fracturing fleets when prices were low in 2020.

Gasoline’s retail prices exceed wholesale costs due to refining, transportation, marketing, and taxes, and the gap between the two tends to fluctuate – as retail prices often fall more slowly.
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Additional reporting by Timothy Gardner and David Shepardson in Washington, Liz Hampton in Denver and Sabrina Valley in Houston; Editing by Richard Boleyn, Jonathan Otis and David Gregorio

Our criteria: Thomson Reuters Trust Principles.