Big Oil Tells Congress: Markets, Not businesses, Dictate Gasoline Pricing

The meeting, scheduled for 10:30 ET (14:30 GMT), is being held by members of the United States House Energy and Commerce Subcommittee on Oversight and Investigations to grill firms about why gasoline prices continue to rise despite falling crude oil prices, the feedstock for fuels.

US gasoline prices, pushed higher by Russia's invasion of Ukraine and Western sanctions on Moscow's energy exports, reached a record high of $4.33 a gallon on March 11 before falling to $4.17 a gallon on Wednesday, according to the AAA motorist association, a decrease of almost 4%.

Meanwhile, international oil prices have fallen even more precipitously, from a high of more than $139 per barrel in early March to about $107 per barrel on Tuesday, a decline of 23%.

"We will not sit back and allow the fossil fuel industry to exploit the American people and gouge them at the pump," Democratic subcommittee chair Diana DeGette said of the hearing, which will feature testimony from executives from Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP) America, Shell (LON:RDSa) America, Devon Energy Corp (NYSE:DVN), and Pioneer.

"We want to understand what is generating these record-high costs and what must be done promptly to bring them down," she added. Numerous Democrats have claimed that oil firms have earned unprecedented profits at the expense of consumers.

The oil companies will argue that labor and supply shortages are impeding a rapid return of oil production to pre-pandemic levels and that prices are determined on the international market.

Mike Wirth, CEO of Chevron, will assert that gasoline prices are determined by market forces over which firms have little influence.

"Adjustments in crude oil prices do not necessarily translate into quick changes at the pump," Wirth will explain. "And, although crude oil prices may fall more rapidly, it typically takes longer for competition among retail stations to drive down pump prices."

President Joe Biden, a Democrat, pushed oil corporations last week to increase production and prioritize serving American people above investors, as he announced a record-breaking release of oil from strategic reserves.

Chevron intends to increase capital expenditures by 50% this year, with about half going toward expanding oil and gas production and the other half toward renewable fuels and lower-carbon energy, Wirth would remark, referring to previously declared intentions.

Exxon, the largest oil firm in the United States, announced Monday that its first-quarter earnings might exceed a seven-year high. The preview provided insight into what lies ahead for other companies' oil revenues in the aftermath of Russia's incursion, which drove energy prices higher.

"No one firm determines the price of oil or gasoline," Exxon Chairman and CEO Darren Woods will testify. "The market determines the price based on the quantity of available goods and the demand for those goods."

Gretchen Watkins, president of Shell USA, will state that her business does not own or control the 13,000 petrol stations that use the Shell name. "Each of these independently owned companies is accountable for fixing the retail price of gasoline in their own communities."

Scott Sheffield, chief executive of Pioneer, the Permian Basin's largest producer, will explain that oil firms are unable to swiftly turn on the taps due to labor and supply chain bottlenecks, as well as the retirement of many rigs and hydraulic fracturing fleets in 2020 when prices were low.