WASHINGTON – President Joe Biden on Wednesday called on federal regulators to investigate whether oil and gas companies are engaging in “illegal behavior” by profiting from high gas prices that have skyrocketed during the pandemic.
Biden, who is facing increasing political pressure as inflation has risen to a 31-year high, called for the investigation in a letter to the head of the Federal Trade Commission, Lina Khan, claiming “increasing evidence of anti-consumer behavior from oil and gas companies. “
“The conclusion is this: gasoline prices at the pump remain high, even as oil and gas companies̵[ads1]7; costs fall,” Biden said in the letter. “The Federal Trade Commission has the authority to assess whether illegal behavior costs families at the pump. I think you should do it immediately.”
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The national average price for a gallon of regular gasoline is $ 3.41. That’s $ 1.29 more than a year ago, according to the American Automobile Association, and a seven-year high. Although the national average fell a penny last week, California gas prices broke a new record on Tuesday with an average price tag of $ 4,687 per gallon.
Gas prices have risen sharply during the pandemic in the midst of an increase in the price of oil, which is refined into petrol. The price of US reference crude oil has almost doubled in the last 12 months and traded at 79 dollars per barrel on Wednesday morning.
But Biden noted that the price of unfinished gasoline is down more than 5% compared to last month – traded at 235.4 on Wednesday, compared to 248.64 on October 15 – while gas prices have risen 3% in the same period. He said that the prices at the pump usually react to changes in the prices of unrefined petrol, the primary ingredient in motor petrol sold at petrol stations.
“This inexplicably large gap between the price of unfinished gasoline and the average price of the pump is well above average before the pandemic,” said Biden, adding that the largest oil and gas companies generate “significant profits at higher energy prices.”
If the gap between pump prices and refined oil costs were at typical pre-pandemic levels, Americans would pay 25 cents less per gallon of gas, according to the White House.
Biden said that the two largest oil and gas companies – ExxonMobil and Chevron – are on track to almost double their net income during 2019, the last full year before the pandemic. He said both companies have announced plans to “engage in billions of dollars in stock buybacks and dividends this year or next.”
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“I do not accept that hard-working Americans pay more for gas because of anti-competitive or otherwise potentially illegal behavior,” Biden said in the letter. “I therefore ask that the Commission investigate further what is happening with the oil and gas markets, and that you include all the Commission’s tools if you discover anything wrong.”
Representatives of ExxonMobil and Chevron did not respond to requests for comment.
But the industry’s lobby association, the American Petroleum Institute, blew up Biden’s move.
Frank Macchiarola, Senior Vice President of Political, Economic and Regulatory Affairs, called Biden’s push for an investigation “a distraction” from the ongoing market change and “reckless government decisions” he claimed aggravated the situation.
Macchiarola said that the higher gas prices are caused by increasing demand for gasoline that surpasses supply as the economy picks up after the pandemic. “A further impact on the imbalance,” he added, is the move by the Biden administration to limit access to fossil fuels.
“Instead of launching research into markets that are regulated and closely monitored on a daily basis or begging OPEC to increase supply,” he said, “we should encourage the safe and responsible development of US-produced oil and natural gas.”
Biden has seen its approval rating fall in recent months as inflation has risen, even as other facets of the economy, such as the stock market and the number of jobs, improve. This is a big warning sign for the Democrats ahead of next year’s by-elections.
The FTC has the power to enforce consumer protection laws against “unfair or misleading acts or practices” and to open investigations to obtain data on how companies set gas prices. The Biden administration has slowly increased the pressure on the agency. In August, Brian Deese, director of the National Economic Council, asked the FTC to “monitor” for potentially illegal behavior by oil and gas companies.
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Some experts expressed skepticism about the White House’s latest move. Patrick De Haan, Head of Petroleum Analysis for the GasBuddy Fuel Saver App, said the higher prices reflect global markets, not pricing.
Demand for gas fell in the spring of 2020 during shutdowns at the start of the pandemic, which led to a fall in oil prices. Gas prices rose a year ago when the economy reopened and demand increased. OPEC agreed to increase oil production in July, but supply has still not met higher demand, according to De Haan, partly due to an oil crisis in China and a shortage of natural gas in Europe.
“Throughout 2021, but especially this summer and autumn, demand has significantly outstripped supply, and it has provided the catalyst for why oil and gas prices have continued to rise,” he said.
De Haan accused the White House of apparently “picking and choosing” numbers, claiming that oil prices have not been on a steady decline long enough for gas stations to reduce customer prices.
“Of course, the president must at least insinuate that he is doing something about it or looking at it,” De Haan said, but added: “There is not much meat behind what he says.”
Contributor: Nathan Bomey. Now Joey Garrison on Twitter @joeygarrison