Oil Industry Executives Smack Down House Democrats in Congressional Hearing

Guest “Is flunking math a prerequisite for Democrat politicians?” by David Middleton

These cretins actually called the hearing, “Gouged at the Gas Station and America’s Pain at the Pump”…

Big Oil Executives Testify in ‘Gouged at the Gas Station’ Hearing in Congress

By Sabrina Escobar
Updated April 6, 2022

Executives from the largest oil and gas companies testified Wednesday — and got a grilling from lawmakers — at a House committee hearing on their role in setting gas prices at the pump.

The hearing — “Gouged at the Gas Station: Big Oil and America’s Pain at the Pump” — intends to “examine the oil industry’s role in the recent increase in gasoline prices in the United States,” according to a memorandum sent by Rep. Frank Pallone, a Democratic representative from New Jersey.

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Barrons

After listening to a bunch of crap from Democrat representatives, the oil industry executives and former National Security Adviser H.R. McMaster responded:

Gretchen Watkins, president of Shell USA, the U.S. subsidiary of U.K.-based Shell plc (ticker: SHEL), said: “Shell does not set or control the price of crude oil” or the prices that consumers pay at the pump. “Indeed, it would be illegal for Shell to do so because nearly all Shell-branded retail stations in the United States are owned by independent operators who set their own prices in the marketplace.”

Chevron (CVX) CEO Michael Wirth said the company had committed to increasing capital spending this year by more than 60% from 2021, with approximately half of that increase going to oil and gas production.

“I also want to be absolutely clear about where Chevron stands: We do not control the market price of crude oil or natural gas, nor of refined products like gasoline and diesel fuel, and we have no tolerance for price gouging,” Wirth said.

David Lawler, chairman and president of BP America (BP), told the committee that all but about 10% of the BP stations are independently operated, and that the higher pump prices could reflect oil entering the refinery system that could have been purchased at a higher price and that’s working its way through the system.

He said BP aimed to start up Argos, a production platform that would increase Gulf production by 25%, and planned to spend more than $1 billion to install infrastructure that would reduce emissions from onshore production.

Retired U.S. Army Lt. General H.R. McMaster, a senior fellow at the Hoover Institution at Stanford University, said Russia has actively worked to discourage fracking, decrease American exports and keep other countries dependent on its oil and gas.

[…]

Barrons

Chevron CEO Michael Wirth also noted that about half of their increase in CapEx was going to renewable energy and low carbon solutions projects, like CCS.

Wirth restated Chevron’s plans to boost capital expenditure this year by 50%, with about half going to increasing oil and gas output and half to renewable fuels and lower-carbon energy.

Reuters

One recurring theme is the mistaken notion that gasoline prices are remaining high, while crude oil prices are falling.

“One of the things that has confused me … and it’s making people mad, is why are gas prices still high?” said U.S. Representative Diana DeGette, a Democrat and chair of the subcommittee.

Reuters

The Reuters article featured this graph:

Apart from a couple of spikes, the delta between retail and wholesale gasoline prices has ranged from $0.75 to $1.00/gal.

The taxes and other fees on retail gasoline and diesel fuel, in cents per gallon, as of January 1, 2022 are:	Gasoline	Diesel
Federal	18.40	24.40
Average of total state taxes	31.02	32.66

An average of $0.49/gal of that delta consists of federal and state taxes. Stated another way, 1/2 to 2/3 of the difference between wholesale and retail gasoline prices consists of taxes.

These fundamentals haven’t changed.

Since the beginning of 2021, crude oil prices have actually risen significantly faster than retail gasoline prices.

It’s important to restate the fact that these oil companies own very few retail outlets. They have no control over either crude oil or retail gasoline prices, nor would they benefit from a higher wholesale-retail differential.

Democrats demand control of oil companies’ cash flow

The most insane demand made by the Democrats was for the oil companies to hand over control of their cash flow to Congress…

During a hearing, Rep. Frank Pallone, a New Jersey Democrat, asked the top executives from ExxonMobil (XOM), Chevron, BP, Shell, Pioneer Natural Resources and Devon Energy if they would commit to “doing whatever it takes,” including not just increasing production but reducing dividends and buybacks to lower prices for American consumers.

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‘The answer is no on dividends’

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“We can increase production and return value to shareholders,” Chevron (CVX) CEO Mike Wirth said in response. BP (BP) America CEO David Lawler said he “can’t commit” to cutting buybacks and dividends.

Gretchen Watkins, the president of Shell (RDSA) USA, said her company believes it can return value to shareholders, boost supply of oil and invest in renewables. “We will be doing all of that,” Watkins said.

And Scott Sheffield, the CEO of Pioneer Natural Resources (PXD), said his company will increase production but flatly declined to dial back dividends. “The answer is no on dividends,” Sheffield said.

Lawmakers fired back with strong complaints, suggesting that the executives should be squarely focused on shareholders, particularly during the war in Ukraine.

“During this Russian war, you are ripping the American people off and it must end,” said California Democrat Rep. Raul Ruiz, who also referenced a recent Dallas Federal Reserve survey in which 59% of oil executives said investor pressure to maintain capital discipline is the primary reason publicly traded oil producers are restraining growth.

“Gas prices cannot continue to be dependent on the whims of autocrats like Putin who can weaponize oil against us,” Ruiz said.

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CNN

Is Rep. Paul Ruiz really that stupid? Speaking of stupid…

I’ll repeat the really stupid bit…

Kernen: Were you one of the 26 House Democrats who voted for the bill last year to outlaw fracking as well as oil and gas production?

Representative Schakowsky: Look, the question is are the, has these, what are the oil companies doing. Yes, I a..I, I, I, I am against fracking. I think it’s a real problem.

Question: Did you vote yes on that.

Schakowsky: The question is that the oil companies made the decision rather, in this crisis right now, to raise the cost, to gouge the consumers, to, uh, in some ways, to, to, to, just to do what we day in, uh, th, thuh, the name of the hearing today is [checks notes] “gouged at the gas pump,”, um, [checks notes again] “Big Oil and America’s pain at the pump.”

They had an option to do that. To increase their ability right now, not to have to frack, not to have to drill more, but to simply, at their ability right now to raise the amount of gas that they produce.

https://www.linkedin.com/posts/david-blackmon-2325189_energyabsurdityoftheday-squawkbox-joekernen-activity-6917473407529795585-h6D9?utm_source=linkedin_share&utm_medium=member_desktop_web

She really said this:

They had an option to do that. To increase their ability right now, not to have to frack, not to have to drill more, but to simply, at their ability right now to raise the amount of gas that they produce.

Rep. Jan Schakowsky (D-IL08)

That’s actually dumber than what Rep. Ruiz said,

Back to dividends and buybacks

I don’t currently own ExxonMobil (XOM) or Chevron (CVX) stock. I used to be an XOM shareholder. One of the main reasons I bought XOM was the dividend. That’s probably the main reason that many XOM shareholders bought the stock. The demand that XOM, CVX and other companies suspend their dividends because of Biden’s incompetence the war in Ukraine, is at best Leninist. The shareholders own these companies. Congress doesn’t. Here’s chart of XOM & CVX net operating cash flow (NOCF), capital expenditures (CapEx), free cash flow (FCF), dividends and oil prices (WTI) over the most recent five quarters:

A couple of things stand out:

1. Major oil companies XOM and CVX haven’t increased their CapEx as quickly as the large independents (PXD, DVN and EOG) we looked at yesterday. Major oil companies can’t do anything as quickly as independents.
2. Neither company has increased their dividends. The question should be, “Why aren’t you returning more to your shareholders”?

That’s where buybacks come in to play

One of the primary purposes of a business is to return value to their owners, shareholders in the case of publicly traded companies. The returns generally take the form of increasing the stock price and/or paying dividends. One of the ways that large companies, like XOM and CVX, increase their stock price is to buy back shares. XOM actually suspended its buyback program in 2016 and only recently announced that they would “repurchase $10 billion worth of stock over the next 12 to 24 months.” CVX “said it now plans to buy back $5 billion to $10 billion worth of stock a year, up from prior plans for $3 billion to $5 billion of annual repurchases.“

The two companies combined will spend $15 to $30 billion over the next two years on stock buybacks… $7.5 to $15 billion per year.

Context

Putting this in context of their 2021 performance:

• Gross Revenue: $436.8B
• Pre-tax Income: $52.87B
• Income Taxes: ($14.2B)
• Net Income: $38.67B
• Profit Margin: 8.9%
• Effective Tax Rate: 26.9%
• CapEx: ($19.68B)
• Dividends: ($25.1B)
• Buybacks: ($7.5B to $15B)

In 2021, Apple spent $85B on stock buybacks and paid out $14.5B in dividends, had a 42% profit margin and an effective tax rate of only 13%… Why aren’t the Democrats berating Tim Cook?