Biden calls for investigation of ‘potentially illegal conduct’ in the oil sector

US President Joe Biden has called on the Federal Trade Commission (FTC) to investigate whether the country’s biggest oil companies, including ExxonMobil and Chevron, are involved in “potentially illegal conduct” that results in the increase of gasoline prices for Americans.

In a letter to FTC President Lina Khan, Biden said there is “growing evidence of anti-consumer behavior” in the market, noting that the two “largest oil and gas companies…as measured by market capitalization” were planning “billions of dollars in share buybacks and dividends” while pump prices continue to rise.

The two main US oil and gas companies in the market assessment are Exxon and Chevron.

Biden said companies are “generating [lucros] “The bottom line is this: gas prices at the pump remain high, even though the costs of oil and gas companies are coming down.”

The president’s intervention comes as he faces mounting political pressure on rising fuel prices and inflation. Its approval rating has fallen in recent weeks, with a larger share of Americans taking a negative view of their conduct of the economy.

The Obama administration also recruited the FTC to investigate rising gasoline prices as part of a “working group on oil and gas price fraud” announced in 2011. The commission determined that the main driver of fuel prices was the crude oil price.

In 2006, President George W. Bush called for an investigation into possible price manipulation by oil companies.

The Biden government is considering releasing crude oil from strategic federal stockpiles in an attempt to lower the price of fuel, and has repeatedly called on Saudi Arabia, Russia and other OPEC+ countries to increase crude production.

“The FTC is concerned about this issue, and we are looking into it,” the regulator said.

Exxon did not immediately respond to requests for comment. Chevron referred the Financial Times to the American Petroleum Institute industry group, which said Biden’s letter was a “distraction from the fundamental market shift taking place” and blamed the government for restricting US oil supplies.

Crude oil prices dropped to record levels last year as pandemic lockdowns devastated demand, but have more than doubled since vaccination results were released last November and social constraints eased.

Rising crude prices have also put pressure on US oil prices, with a gallon (3.78 liters) of gasoline now selling on average for $3.41 ($1.10 a liter, or R$6. 11) —a 60% increase in the last 12 months—, according to the AAA auto group.

Biden’s letter to Khan marks an escalation in White House rhetoric about competition in the oil and gas industry. Brian Deese, director of the National Economic Council, sent a letter to Khan in August urging the FTC to crack down on any collusion in the US oil market.

Biden’s critics in the oil sector blame the government, due to its climate policies and limits on new prospecting, for rising prices, but analysts say Wall Street’s pressure on operators to pay off debt and capital has hampered the recovery prospecting after falling prices last year.

US oil production is approximately 11.5 million barrels/day, according to the Energy Information Administration, about 12% below its pre-pandemic peaks. US oil consumption hit a floor of approximately 5 million barrels/day during the lockdowns last year, but has nearly doubled since then.

Analysts said Biden’s letter to the FTC followed a policy manual known to presidents looking to blame for rising fuel prices and would have little impact on prices.

“How many times has the FTC investigated gas prices and it came to nothing? It’s a political trick,” said Robert Campbell, head of oil products at Energy consultancy Aspects.

“The biggest influence on gasoline prices is the price of crude. The global market is tight. There’s not much the US can do about it right now,” Campbell said.

Translated by Luiz Roberto M. Gonçalves