Large oil companies took in over $22 billion in profits in the first quarter of 2022 as gas prices have soared.
President Joe Biden sent a letter on Tuesday to executives at seven of the largest oil refining companies in the country, calling on them to increase production capacity as Americans face high fuel costs and the companies reap massive profits.
The letter reads in part:
Vladimir Putin’s war of aggression, and the bipartisan and global effort to counter it, has disrupted the global supply of oil and driven up the global price. But the sharp rise in gasoline prices is not driven only by rising oil prices, but by an unprecedented disconnect between the price of oil and the price of gas. … That difference — of more than 15% at the pump — is the result of the historically high profit margins for refining oil into gasoline, diesel and other refined products. Since the beginning of the year, refiners’ margins for refining gasoline and diesel have tripled, and are currently at their highest levels ever recorded.
In the year before I took office, refineries in the United States reduced their capacity by more than 800,000 barrels a day, leaving American refinery companies today at their lowest level of capacity in more than a half decade.
I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office. But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.
I request that you provide the Secretary [of Energy] with an explanation of any reduction in your refining capacity since 2020 and any concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months — including transportation measures to get refined product to market.
According to the New York Times, the letter was sent to Exxon Mobil, Marathon Petroleum, BP, Chevron, Phillips 66, Shell USA, and Valero Energy.
In response, American Petroleum Institute President and CEO Mike Sommers released a statement blaming the Biden administration for the high prices, saying:
While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions. I reinforced in a letter to President Biden and his Cabinet yesterday ten meaningful policy actions to ultimately alleviate pain at the pump and strengthen national security, including improving approving critical energy infrastructure, increasing access to capital, holding energy lease sales, among other urgent priorities.
In a statement announcing the API’s “10 in 2022 plan” on June 14, Sommers said, “These 10 in ’22 policies are a framework for new energy leadership for our nation, unleashing investment in America and creating new energy access while avoiding harmful government policies and duplicative regulation. It’s time to lead.”
The institute is a trade association that has frequently attacked efforts to regulate the oil and gas industry and promote the use of alternative fuel sources that produce less pollution. All of the companies that received Biden’s letter except Valero are listed on the institute’s website as members.
Contrary to the API’s charges that the administration has “added headwinds” to the companies’ efforts, as Biden said during a speech in March, the domestic oil and gas industry has received 9,000 permits to drill on federal and Native American lands, including some issued by the Biden administration. The companies have so far chosen not to tap those resources.
Biden has prioritized investment in clean energy during his presidency, a marked change from the policies of the Trump administration, which blocked enforcement of EPA standards and allowed anti-science personnel and industry insiders to determine American energy policy.
The national average price for gas was $5.014 a gallon as of Wednesday.
Biden tweeted on March 12, “Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.”
A May report issued by the nonpartisan organization Accountable.US noted that the top oil and gas companies brought in $22 billion in profits in the first three months of 2022.
“On average, the companies made $1.2 billion more with many even doubling their profits when comparing the first quarters of 2022 and 2021,” the report said.
In April, for example, Exxon Mobil announced that its profits were $5.48 billion in the first quarter, double what they were during the same period in 2021. Darren Woods, the company’s CEO, saw his pay increase to $23.6 million in 2021, $7 million more than he was paid the year before.
Marathon Petroleum in May announced that it had earnings of $845 million in the quarter after losing $242 million in the same quarter of 2021. Marathon CEO Michael Hennigan saw his total compensation increase 36% in 2021 from the year before to $21.2 million.
On May 19, the Democratic-controlled House passed the Consumer Fuel Price Gouging Prevention Act, which would combat gas price gouging. The bill would give the president the authority to issue an “energy emergency proclamation,” during which it would be unlawful for companies to raise prices for gas and home energy fuel “at a price that— (A) is unconscionably excessive; and (B) indicates the seller is exploiting the circumstances related to an energy emergency to increase prices unreasonably.” It would direct the Federal Trade Commission to punish companies that violated the law. All of the Republicans in the House, along with four dissenting Democrats, voted against the bill.
Senate Majority Leader Chuck Schumer said last month that he would force a vote in the Senate on the legislation.
Published with permission of The American Independent Foundation.