Big Oil to tell Congress markets, not companies, set fuel prices

Lawmakers in the U.S. House Energy and Commerce Subcommittee on Oversight and Investigations are holding the hearing, slated for 10:30 ET (14:30 GMT), to grill companies on why gasoline prices remain elevated even though prices for crude oil, the feedstock for fuels, have dropped.

U.S. gasoline prices, driven up by Russia’s invasion of Ukraine and Western sanctions on Moscow’s energy exports, hit a record, before inflation adjustments, on March 11 of $4.33 a gallon and slipped to $4.17 a gallon on Wednesday, according to the AAA motorist group, a decline of about 4%.

International crude prices, meanwhile, have dropped more far more steeply, from a peak of more than $139 per barrel in early March to about $107 on Tuesday, a fall of 23%.

“We will not sit back and allow the fossil fuel industry to take advantage of the American people and gouge them at the pump,” Diana DeGette, a Democrat and chair of the subcommittee, said about the hearing at which executives from Exxon Mobil (XOM.N), Chevron (XOM.N), BP America (BP.L), Shell USA , Devon Energy Corp (DVN.N) and Pioneer (PXD.N) will testify.

“We want to know what’s causing these record-high prices and what needs to be done to bring them down immediately,” she said. Many Democrats have complained that oil companies have made record profits while consumers face high prices.

The oil companies will say that labor and supply shortages are preventing a quick return of oil output to pre-pandemic levels, and that prices are determined in the international market.

Chevron’s chief executive Mike Wirth will say that fuel prices are set by market dynamics that companies have little control over.

“Changes in the price of crude oil do not always result in immediate changes at the pump,” Wirth will say. “And while the price of crude oil might dip more quickly, it frequently takes more time for competition among retail stations to bring prices back down at the pump.”

Last week President Joe Biden, a Democrat, urged oil companies to boost output and service American families instead of investors, as he announced a record release of oil from strategic reserves.

Chevron plans to boost capital expenditure this year by 50%, with about half of that going to increasing oil and gas output and the other half going to renewable fuels and lower-carbon energy, Wirth will say, about goals announced previously.

Exxon, the top U.S. oil company, on Monday said its first-quarter results could top a seven-year quarterly record. The preview offered a signal of what lies ahead for other firms’ oil earnings after Russia’s invasion pushed up energy prices.

“No single company sets the price of oil or gasoline,” Darren Woods, the chairman and chief executive of Exxon, will say according to the testimony. “The market establishes the price based on available supply, and the demand for that supply.”

Gretchen Watkins, the president of Shell USA, will say that her company neither controls or owns the 13,000 gas stations that carry its brand. “Each of these independent businesses is responsible for setting the local retail price of gasoline.”

Scott Sheffield, the chief executive of Pioneer, the top producer in the Permian Basin, will say oil companies cannot quickly turn on the taps because of worker and supply chain shortages, and the decommissioning of many rigs and hydraulic fracturing fleets when prices were low in 2020.