It’s Not Price Gouging, Says Literally Everyone
Misguided claims of gasoline price gouging continue to bounce around Capitol Hill with the latest salvo coming from Energy & Commerce Committee Chairman Frank Pallone (D-N.J.) even though both Democratic and Republican-aligned economists, independent energy analysts, and the media have stated over and over again that no such practices exist.
Citing the House Oversight investigation as justification, Rep. Pallone asks questions of the oil companies that he already knows the answers to: How the companies are deploying their record profits, and what the companies are doing to alleviate Americans’ pain at the pump.
It turns out, Rep. Pallone doesn’t need to investigate at all – each company already discussed these details on their respective earnings calls.
Chevron said that the company’s current production is “at record levels and growing.” Chevron also described how it plans to spend profits:
“We’re executing our plans, increasing investment to grow both traditional and new energy supplies, and delivering value to our stakeholders.”
ExxonMobil highlighted its workers who have safely operated facilities at high utilization levels, and praised “their commitment to supplying the energy and products the world needs.” Compared to the first half of 2021, Exxon grew its production in the Permian Basin by approximately 130,000 barrels per day – 30,000 b/d more than all of OPEC’s most recent capacity increase and that’s just in the Permian.
Further, the company expects to achieve 25 percent production growth in the Permian for the second consecutive year this year and has continued to invest in increasing its refinery capacity.
Looking forward, Exxon CEO Darren Woods said that the company’s focus on the fundamentals remains unchanged by anomalous market movements:
“We will successfully address the dual challenge, providing energy and products modern societies need while lowering society’s greenhouse gas emissions, leading industry in the energy transition.”
Shell cited its North Sea offshore natural gas project – which may come online as soon as fall 2022 – as one way the company is increasing production to “deliver the energy the world needs today.” At the same time, Shell is investing heavily in renewable hydrogen projects and is spending between $7-9 billion on its upstream production.
And in its most recent earnings call, BP cited its integrated strategy as the solution to the “energy trilemma”:
“These are stark examples of what we call the energy trilemma: energy security under threat; energy affordability, an acute problem for many; and a pressing need for lower carbon energy. The obvious question for us and for our people is, ‘How can we help?’ And that is why we are absolutely focused on delivering our strategy to become an integrated energy company.”
A cursory read of each company’s earnings transcripts would have provided answers to Rep. Pallone’s questions, but wouldn’t have given the media a reminder that his committee is still conducting an investigation over baseless price gouging allegations.
Experts Agree, It Isn’t Price Gouging
The price gouging accusation campaign hit full blast in March, when President Biden tweeted, “Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans,” which was swiftly rejection by literally everyone, including:
- Garrett Golding, Dallas Federal Reserve Bank:
“It’s not price gouging or a grand plot by the industry. This is how the business functions.”
- Bob McNally, Rapidan Energy:
“There’s always a multi-week lag between global crude oil and domestic pump price changes, Mr. President…Gouging is not an issue, sir.”
“Democrats blame oil companies for high fuel prices. But the facts don’t back them up.”
In the months since, additional gasoline price gouging accusations continued including from the New York Attorney General and Chairman Pallone, whose committee held a hearing on the topic.
Yet, the rejections kept coming, again, from literally everyone:
“Democratic leadership has also sought to blame oil companies for high gas prices, a growing concern for voters ahead of the midterm elections, despite no evidence of price gouging.”
- Phil Verleger from the Niskanen Institute cited more than 100 investigations and lawsuits brought on by everyone from consumers to the FTC and numerous attorneys general over the last 30 years that all “flopped”, saying:
“There’s no such thing as price gouging.”
- Even Jennifer Granholm, Biden’s own Energy Secretary, admitted it:
🚨 @SpeakerPelosi JUST held a press conference to blame surging gas prices on price gouging.
The American people aren’t buying the Democrats’ blatant attempt to shift blame, & apparently, @SecGranholm isn’t either. ↓
“I’m not sure anyone is saying there is wholesale gouging.” pic.twitter.com/8mi7paadXX
— Energy & Commerce GOP (@HouseCommerce) April 28, 2022
It’s a Highs and Lows Business
Gasoline price gouging accusations suggest that the oil and natural gas industry control the price of oil and gasoline, but as Energy In Depth has noted, the oil and natural gas industry is defined by highs and lows. The industry doesn’t control the price of oil nor the price of gasoline and that’s the reason that both prices dropped drastically in April 2020 amid the collapse in oil demand during COVID-19.
This led to massive industry losses in 2020 as the New York Times reported in February 2021:
“Exxon Mobil, BP and other large oil companies collectively lost tens of billions of dollars last year, posting their worst performance in years and, for some companies, in decades. … Exxon reported that it lost $22.4 billion in 2020 … BP said on Tuesday that it lost $5.7 billion last year … Conoco Phillips, the largest American independent producer, lost $2.7 billion for the year. Chevron said last week that it had lost $5.5 billion.”
In coverage of second quarter earnings last week, the media was quick to remind their audiences of this. As CNN’s Matt Egan explained:
“This is obviously frustrating to people dealing with very high gas prices right now. We should remember, though, that the oil industry did get crushed during COVID. The world was shut down. Oil prices went negative very briefly. People weren’t driving as much. Companies went bankrupt. Exxon alone lost $22 billion during that span. The company says they continued to invest in new supply during that span, even though they lost money. Clearly this is a boom to bust industry. Ups and downs. Right now they are riding very high.”