As President Joe Biden on Thursday ordered the release of one million barrels of oil per day from the Strategic Petroleum Reserve for six months in a bid to reduce surging gas prices, Public Citizen released a report that details how Big Oil is intentionally creating “pain at the pump” to boost profits.
While the fossil fuel industry has tried publicly to pin the blame for soaring gas prices on the Biden administration’s ostensibly strict environmental regulations, oil executives have admitted behind closed doors that they are suppressing production to maximize shareholder returns.
“Oil and gas companies lost a ton of money between 2010 and 2020, mainly by borrowing way too much to fund an expansion of drilling using expensive oil and gas fracking technology,” Alan Zibel, fossil fuels research director at Public Citizen and author of the report, said in a statement. “The result was unsustainable overproduction and massive losses when oil prices plunged, as they did two years ago at the start of the pandemic. Now the industry is keeping production down and making consumers pay.”
After a brief coronavirus-driven decline in 2020, demand returned, but shareholders pressured oil producers to restrict supply to push prices higher. Last year, as average gas prices in the U.S. steadily increased—hitting around $3.40 per gallon in December 2021, up from $2.10 a year before—25 of the world’s biggest fossil fuel corporations raked in a record $205 billion in profits.
Oil and gas companies have hiked prices even further during the first three months of 2022—especially in the three weeks since Biden announced a U.S. ban on imports of Russian fossil fuels in response to Moscow’s invasion of Ukraine, leading to growing accusations of war profiteering. The average price for a gallon of gas in the U.S. is now hovering around $4.23.
With other countries also taking steps to restrict imports of Russian oil and gas, U.S. fossil fuel executives have expressed excitement at the prospect of using ongoing geopolitical crises as an excuse to force consumers to accept higher costs for the foreseeable future, and they are projected to reap up to $126 billion in extra profits this year. After rewarding themselves and other investors with billions of dollars worth of stock buybacks and dividend bumps last year, industry bosses have made clear they intend to do more of the same in 2022.
Beginning around 2010, a drilling and fracking boom turned the Permian Basin into the most productive oil and gas field in the world. It transformed the U.S. into a major exporter of fossil fuels but kept prices at the pump low, much to the chagrin of shareholders.
“It proved to be a colossal financial disaster, and investors have long been frustrated by years of bankruptcies and paltry long-term returns,” the new report explains. “Oil industry executives now say they are focused on pleasing shareholders and running their operations with an eye on making money—rather than simply funding expansion that ends up putting a glut of oil on the market and depressing prices.”
In recent conference calls with investors, “numerous executives have emphasized that shareholder profits, rather than expanding domestic production, is their top goal” now, Public Citizen noted in a statement. “Last week, the Federal Reserve Bank of Dallas published a survey that revealed nearly 60% of executives from 132 oil and gas companies found that investor pressure to keep profits high is the main reason oil producers are restraining growth.”
However, that hasn’t stopped the fossil fuel industry and its Republican allies from deflecting blame for worsening pain at the pump.
As the report documents, on Capitol Hill and on Fox News, GOP lawmakers and Big Oil lobbyists have “shamelessly seized upon the Russian invasion to argue in favor of expanded oil drilling” and fracked gas exports, while baselessly accusing Biden—who approved more permits for drilling on public lands and waters in 2021 than former President Donald Trump did in three of his four years in the White House—of suppressing domestic extraction.
According to the report:
The industry’s playbook is clear: grumble about the Biden administration, ignore climate change, downplay the dramatic growth of clean alternatives and electric transportation, push for looser regulations, promote pet projects such as drilling in Alaska, and lock in drilling for as long as possible.
As Biden boasted earlier this month, U.S. fossil fuel corporations “pumped more oil during my first year in office than they did during my predecessor’s first year.” Domestic oil and gas production is “approaching record levels,” said Biden, “and we’re on track to set a record for oil production next year.”
The president argued that any blame for untapped extractive potential should be placed on the shoulders of those who are sitting on millions of acres of federal property. “They could be drilling right now, yesterday, last week, last year,” Biden said, referring to leaseholders who possess thousands of unused permits.
On Thursday, as he ordered the release of one million barrels of oil per day from the Strategic Petroleum Reserve for six months, Biden called on Congress to impose financial penalties on fossil fuel companies that lease public lands without producing.
Jamie Henn, director of Fossil Free Media, was among those who criticized Biden for failing to “address the root cause” of high prices. Like Public Citizen, Henn attributed pain at the pump to “Big Oil’s coordinated campaign to gouge Americans.”
In a more progressive attempt to rein in price gouging by fossil fuel corporations, congressional Democrats earlier this month introduced the bicameral Big Oil Windfall Profits Tax, as Common Dreams reported.
The measure, which is supported by 80% of U.S. voters, would hit large fossil fuel companies with a per-barrel tax—whether the oil is domestically produced or imported—equal to 50% of the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019. An estimated $45 billion in annual revenue would be redistributed to U.S. households in the form of quarterly rebates.
“Big Oil executives are reaping windfall profits and driving inflation, pumping up profits while accelerating the climate crisis,” Public Citizen president Robert Weissman said in a statement. “Republican lawmakers and oil industry allies continue to falsely claim that the Biden administration’s ‘hostile rhetoric’ toward the oil and gas industry is stifling investment in the domestic oil industry.”
“The industry’s exaggerated claims and scare tactics are designed to keep the world hooked on fossil fuels that have so devastated our planet,” said Weissman. “The rational response to this crisis moment is a windfall profits tax coupled with a major investment to shift the country—and the world—away from reliance on fossil fuels.”
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