Oil Industry Executives Smack Down House Democrats in Congressional Hearing – Watts Up With That?

Guest “Is failing math a prerequisite for Democratic politicians?” by David Middleton

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

Big Oil Executives Testify at ‘Started 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 were questioned by lawmakers, at a House committee hearing about their role in setting gasoline prices at the pump.

The hearing, “Ripped off at the Gas Station: Big Oil and America’s Pain at the Pump,” is intended to “examine the oil industry’s role in the recent rise in gasoline prices in the United States,” according to a memo. Submitted by Representative Frank. Pallone, Democratic Representative from New Jersey.

[…]

maroons

After hearing a lot of crap from House Democrats, oil industry executives and former national security adviser HR McMaster responded:

Gretchen Watkins, chairman of Shell USA, the US subsidiary of UK-based Shell plc (ticker: SHEL), said: “Shell does not set or control the price of crude oil” or the prices consumers pay at the pump. . “In fact, it would be illegal for Shell to do so because almost all Shell-branded retail stations in the United States are owned by independent operators who set their own prices in the market.”

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

“I also want to be absolutely clear about Chevron’s position: We do not control the market price of crude oil or natural gas, or refined products such as gasoline and diesel, and we do not tolerate price gouging,” Wirth said.

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

He said BP was aiming 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 US Army Lt. Gen. HR McMaster, a senior fellow at Stanford University’s Hoover Institution, said Russia has actively worked to discourage fracking, decrease US exports and keep other countries dependent on its oil. and gas.

[…]

maroons

Chevron CEO Michael Wirth also noted that about half of its increase in CapEx went to low-carbon and renewable energy solutions projects such as CCS.

Wirth reaffirmed Chevron’s plans to increase capital expenditures this year by 50%, with about half going to increasing oil and gas production and the other half to renewable fuels and lower-carbon power.

Reuters

A recurring theme is the misconception that gasoline prices remain high while crude oil prices are falling.

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

Reuters

The Reuters article featured this chart:

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


Taxes and other charges on retail gasoline and diesel, in cents per gallon, as of January 1, 2022 are:
Gasoline Diesel
Federal 18.40 24.40
Average Total State Taxes 31.02 32.66
EIA

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

These fundamentals have not changed.

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

Gasoline slope = 0.0027
Oil slope = 0.0862

It is important to reaffirm the fact that these oil companies own very few retail establishments. They have no control over retail crude oil or gasoline prices, nor would they benefit from a higher wholesale-retail spread.

Democrats demand control of cash flow from oil companies

The craziest demand made by the Democrats was that the oil companies hand over control of their cash flow to Congress…

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

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‘The answer is no to dividends’

[…]

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

Gretchen Watkins, president of Shell (RDSA) USA, said her company believes it can return value to shareholders, increase oil supply and invest in renewable energy. “We’ll do all of that,” Watkins said.

And Scott Sheffield, chief executive of Pioneer Natural Resources (PXD), said his company will increase production but has adamantly refused to cut dividends. “The answer is no to dividends,” Sheffield said.

Lawmakers responded with strong complaints, suggesting that executives should focus squarely on shareholders, particularly during the war in Ukraine.

“During this Russian war, the American people are being ripped off and it must end,” said California Democratic Rep. Raul Ruiz, who also referenced a recent Dallas Fed poll in which 59% of oil executives said that pressure from investors to maintain capital discipline is the main reason why publicly traded oil producers are restraining growth.

“Gasoline prices cannot continue to depend on the whims of autocrats like Putin, who can turn oil into a weapon against us,” Ruiz said.

[…]

CNN

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

I’m going to repeat the really stupid part…

Cores: Were you one of the 26 House Democrats who voted for the bill last year to ban fracking and oil and gas production?

Representative Schakowsky: Look, the question is are they, do you have these, what are the oil companies doing. Yeah, I a… I, I, I, I’m against fracking. I think it’s a real problem.

Ask: Did you vote yes on that?

Schakowski: The question is that the oil companies made the decision, in this crisis right now, to raise the cost, to rip off consumers, to, uh, somehow, to, to, to, just to do what we all do the days. uh, th, thuh, the name of today’s audience is [checks notes] “Pulled 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 capacity at this time, not having to fracture, not having to drill more, but simply, in their capacity at this time to increase 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 actually said this:

They had an option to do that. To increase their capacity at this time, not having to fracture, not having to drill more, but simply, in their capacity at this time to increase the amount of gas that they produce.

Representative Jan Schakowsky (D-IL08)

That’s actually dumber than what Representative Ruiz said,

Back to dividends and buybacks

I currently do not own ExxonMobil (XOM) or Chevron (CVX) stock. He used to be a shareholder in XOM. One of the main reasons I bought XOM was the dividend. That is probably the main reason why many XOM shareholders bought the shares. The demand that XOM, CVX and other companies suspend their dividends for Biden’s incompetence the war in the Ukraine, is at best Leninist. Shareholders own these companies. Congress doesn’t. Here is a chart of XOM and CVX’s Net Operating Cash Flow (NOCF), Capital Expenditures (CapEx), Free Cash Flow (FCF), Dividends, and Oil Prices (WTI) for the five most recent quarters. recent:

A couple of things stand out:

  1. The major oil companies XOM and CVX have not increased their CapEx as fast as the large independents (PXD, DVN and EOG) that we analyzed yesterday. The big oil companies can’t do anything as fast as the independents.
  2. Neither company has increased its dividends. The question should be: “Why aren’t they returning more to their shareholders?”

That’s where buybacks come into play.

One of the main purposes of a company is to return value to its owners, shareholders in the case of publicly traded companies. Returns generally take the form of increasing stock prices and/or paying dividends. One of the ways that large companies, such as XOM and CVX, increase their share price is to buy back shares. In fact, XOM discontinued its buyback program in 2016, only recently announcing that it would “buy back $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 shares per year, up from previous plans of $3 billion to $5 billion buybacks annually.”

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

Context

Putting this in context of his 2021 performance:

  • Gross receipts: $436.8B
  • Income before taxes: $52.87B
  • Income taxes: ($14.2B)
  • Net income: $38.67 billion
  • Profit margin: 8.9%
  • Effective tax rate: 26.9%
  • Capital Expenditure: ($19.68B)
  • Dividends: ($25.1B)
  • Buybacks: ($7.5B to $15B)

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

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