Executives of six large oil and gas companies will testify on Wednesday before a House committee, which is likely to ask them tough questions about whether they are exploiting the Russian invasion of Ukraine to make record profits by refusing to produce more energy.
In remarks prepared for the hearing, the executives said they were not engaging in price gouging and were merely responding to global commodity prices that were out of their control. They also said they were working to move to cleaner energy.
The hearing is taking place as lawmakers in Washington fight over who is responsible for rising gasoline prices and how to balance efforts to limit climate change with the need for more U.S. oil and natural gas production because of Western sanctions against Russia.
The average price for a gallon of gasoline is roughly $1.30 higher than it was a year ago, moving up in tandem with oil prices, which are now just above $100 a barrel. That increase has become a major challenge for President Biden and Democrats, who control both houses of Congress. Some Democrats have called on oil executives to suspend dividend increases and stock buybacks and invest more in developing alternative energy and reducing gasoline prices.
Last week, Mr. Biden said some oil companies had increased production but added that “too many companies aren’t doing their part and are choosing to make extraordinary profits and without making additional investment to help with supply.”
The outrage about oil company profits is not unusual. Politicians often criticize the energy industry for profiteering when gas prices surge and quietly drop their complaints when prices fall back. Over the last 15 years, oil and gas prices have moved up and down in three big cycles, the most recent one beginning with the coronavirus pandemic.
As vaccines became widely available and the pandemic receded, energy demand quickly recovered. But global oil production has not completely returned to prepandemic levels. U.S. production is just shy of 12 million barrels a day, roughly a million short of the record set just before the pandemic. With oil companies adding rigs, the Energy Department expects U.S. production will surpass 13 million barrels next year.
Biden administration officials have urged oil companies to expand production faster, but Wall Street investors are telling them to be more cautious because they don’t want companies to drill up a storm when prices are high only to suffer losses when prices sink again. That is what happened between 2011 and 2015, leading to scores of bankruptcies.
Right now, oil companies are making record profits. Exxon Mobil said this week that its profits in the first three months of the year could total $11 billion, the most the company has made in a quarter since 2008, when the price of a barrel of oil topped $140.
Exxon has cut spending and its work force in recent years, even while boosting production in the Permian basin straddling Texas and New Mexico and off the coast of Guyana. Darren Woods, the company’s chief executive and one of the witnesses at the Wednesday hearing of the House Energy and Commerce Committee, has insisted that Exxon is working to reduce its greenhouse gas emissions while meeting the country’s energy needs but that it is not responsible for rising prices.
The Russia-Ukraine War and the Global Economy
Rising concerns. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has already caused dizzying spikes in energy prices and is causing Europe to raise its military spending.
The cost of energy. Oil prices already were the highest since 2014, and they have continued to rise since the invasion. Russia is the third-largest producer of oil, so more price increases are inevitable.
Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders worry that Moscow could cut flows in response to the region’s support of Ukraine.
Food prices. Russia is the world’s largest supplier of wheat; together, it and Ukraine account for nearly a quarter of total global exports. Countries like Egypt, which relies heavily on Russian wheat imports, are already looking for alternative suppliers.
Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
Mr. Woods will be joined at the hearing by the chief executives of BP America, Chevron, Devon Energy, Pioneer Natural Resources and Shell USA. The committee will also hear from H.R. McMaster, who was a national security adviser to President Donald J. Trump and is now a senior fellow at the Hoover Institution at Stanford.
“Because oil is a global commodity, Shell does not set or control the price of crude oil,” Gretchen H. Watkins, president of Shell USA, is set to tell the committee, according to prepared remarks released on Tuesday night. “Today’s crisis and the pressure on hydrocarbon supplies and prices reveal the urgent need to accelerate the energy transition.”
The debate over who is responsible for rising fuel prices is playing out beyond Capitol Hill. The League of Conservation Voters is displaying an art installation depicting a wall of oil barrels on the National Mall in Washington this week to highlight what it calls “the oil industry’s price gouging.”
Conservatives have countered that oil prices move in cycles and that after making record profits one year, companies often lose money in other years.
“If oil companies are engaging in price gouging now, it’s a mystery why they couldn’t do it when gas was $2.20 a gallon and they were losing money,” said Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute in Washington.