Top executives from ExxonMobil, Chevron, and other US oil companies are testifying in a congressional hearing on April 6 about whether they are inappropriately profiting off the recent surge in oil and gas prices.
Democrats on the House Energy and Commerce Committee have accused the companies of “ripping off the American people” as the price of gasoline remains above $4 per gallon, compared to $2.80 a year ago. In response, according to their prepared remarks, the executives argue that oil prices are outside their immediate control, and that they are working to step up drilling.
Are oil companies profiteering?
At face value, this argument is correct, of course. Oil prices are elevated because of the war in Ukraine and because of production cuts during the pandemic. Even if crude oil prices dip, it always takes time for gasoline prices to follow suit, because of the convoluted chain of traders and refiners that oil has to snake through.
But if there’s questionable behavior by these companies anywhere, it’s on their balance sheets, not at the pump. Oil companies are using much of their windfall profits to enrich their investors rather than hire workers or invest in more oil production (or, even better, in clean alternatives).
An April 5 report (pdf) by the nonprofit BailoutWatch found that top oil companies spent $24.4 billion on share buybacks in the first quarter of 2022, compared to an average of $7.1 billion in the preceding three quarters. The same companies pocketed $8.2 billion in pandemic stimulus funding a year earlier, while laying off 60,000 workers, according to BailoutWatch.
Nevertheless, some companies do have plans to increase spending on oil and gas production; for example, Exxon plans to increase capital expenditure by 45% in 2022, to $24 billion. It will take a couple of years for that investment to yield more oil in the market.
The upside-down politics of 2022
In any case, it’s a strange situation to find congressional Democrats—usually reliable supporters of climate change policy—castigating oil executives for not drilling more, especially the same week as a major scientific report found that current fossil fuel production levels put the climate goals of the Paris Agreement out of reach.
High oil prices, while an annoyance for some households, are less disruptive to the global economy than in the past—and if anything, will help accelerate the adoption of electric vehicles.