By: Pippa Stevens – CNBC – President Joe Biden is asking the Federal Trade Commission to look into behavior from energy companies as prices at the pump hover around a seven-year high.
In a letter to Chair Lina Khan Wednesday, Biden said there’s “mounting evidence of anti-consumer behavior by oil and gas companies.” The letter noted that prices at the pump have remained high despite a decline in the price of unfinished gasoline. “This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average,” the letter said.
The letter added that the “two largest oil and gas companies in the United States” — which are Exxon and Chevron based on market capitalization — are on track to almost double their net income compared with 2019 levels, while the two companies have also announced stock buybacks and dividend hikes.
Biden’s latest request comes as the administration tries to quell the surge in gas prices and its contribution to inflation across the economy. In August the administration called on OPEC and its oil-producing allies to boost output and also asked the FTC to investigate price-gouging at the pump.
The administration has repeatedly said that it’s examining the tools at its disposal to alleviate some of the burden on consumers, which could include tapping the Strategic Petroleum Reserve.
The national average for a gallon of gas stood at $3.41 on Wednesday, according to data from AAA. That’s up from $3.31 one month ago, and $2.12 one year ago.
The jump in gas prices comes as West Texas Intermediate crude futures, the U.S. oil benchmark, hit a seven year high above $85 in October. The blistering rally comes after the contract dipped into negative territory in April 2020 for the first time on record as the pandemic sapped demand for petroleum products.
OPEC+ made the unprecedented decision in April 2020 to remove nearly 10 million barrels per day from the market in an effort to support prices, while U.S. producers also scaled back production.
These supply cuts, coupled with a demand recovery, have pushed oil prices to levels last seen well before the pandemic took hold.
The American Petroleum Institute called Wednesday’s letter from Biden to the FTC a “distraction from the fundamental market shift” that’s ongoing as economics emerge from the pandemic. The industry group said in a statement that “ill-advised government decisions” are “exacerbating this challenging situation.”
“Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply, we should be encouraging the safe and responsible development of American-made oil and natural gas,” said Frank Macchiarola, API’s senior vice president of policy, economics and regulatory affairs.