WASHINGTON – President Joe Biden on Wednesday called for federal regulators to investigate whether oil and gas companies are engaging in “illegal conduct” by profiting from high gas prices that have skyrocketed during the pandemic.
Biden, facing increasing pressure politically as inflation has soared to a 31-year high, requested the probe in a letter to Federal Trade Commission chair Lina Khan, claiming “mounting evidence of anti-consumer behavior by oil and gas companies.”
“The bottom line is this: gasoline prices at the pump remain high, even though oil and gas companies’ costs are declining,” Biden said in the letter. “The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump. I believe you should do so immediately.”
The national average price for a gallon of regular gasoline is $3.41. That is $1.29 more than a year ago, according to the American Automobile Association, and a seven-year high. Although the national average dropped a penny last week, gas prices in California broke a new record Tuesday with an average price tag of $4.687 for a gallon of regular.
Gas prices have risen sharply during the pandemic amid a spike in the price of oil, which is refined into gasoline. The price of U.S. benchmark crude oil has nearly doubled over the last 12 months and was trading in the $79 per barrel range on Wednesday morning.
But Biden noted the price of unfinished gasoline is down more than 5% over last month – trading at 235.4 Wednesday, compared to 248.64 on Oct. 15 – while gas prices have gone up 3% over the same period. He said prices at the pump typically respond to changes in the prices of unrefined gasoline, the primary ingredient in motor gasoline sold at retail gas stations.
“This unexplained large gap between the price of unfinished gasoline and the average price of the pump is well-above the pre-pandemic average,” Biden said, adding that the largest oil and gas companies are generating “significant profits off higher energy prices.”
If the gap between pump prices and refined oil costs were at typical pre-pandemic levels, Americans would be paying 25 cents less per gallon of gas, according to the White House.
Asked whether the agency will open an investigation, FTC spokeswoman Betsy Lordan said, “The FTC is concerned about this issue, and we are looking into it.”
Biden said the two largest oil and gas companies – ExxonMobil and Chevron – are on track to nearly double their net income over 2019, the last full year before the pandemic. He said both companies have announced plans to “engage in billions of dollars of stock buybacks and dividends this year or next.”
“I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct,” Biden said in the letter. “I therefore ask that the commission further examine what is happening with oil and gas markets, and that you bring all of the commission’s tools to bear if you uncover any wrongdoing.”
Representatives of ExxonMobil and Chevron did not respond to requests for comment.
But the industry’s lobbying association, the American Petroleum Institute, blasted Biden’s move.
Frank Macchiarola, the group’s senior vice president of policy, economics and regulatory affairs, called Biden’s push for a probe “a distraction” from the ongoing market shift and “ill-advised government decisions” he claimed are exacerbating the situation.
Macchiarola said the higher gas prices are caused by increasing demand for gasoline outpacing supply as the economy rebounds from the pandemic. “Further impacting the imbalance,” he added, are moves from the Biden administration to restrict access to fossil fuels.
“Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply,” he said, “we should be encouraging the safe and responsible development of American-made oil and natural gas.”
Biden has seen his approval rating dip in recent months as inflation has increased, even as other facets of the economy, such as the stock market and jobs numbers, improve. It’s a major warning sign for Democrats ahead of next year’s midterm elections.
The FTC has the power to enforce consumer-protection laws targeting “unfair or deceptive acts or practices” and to open investigations to obtain data on how companies set gas prices. The Biden administration has slowly ramped up pressure on the agency. In August, Brian Deese, director of the National Economic Council, asked the FTC to “monitor” for potential illegal conduct by oil and gas companies.
Some experts expressed skepticism about the White House’s latest move and said presidents have limited options to control gas prices. Patrick De Haan, head of petroleum analysis for the fuel-savings app GasBuddy, said the higher prices reflect global markets, not price fixing.
The demand for gas plummeted in the spring of 2020 during lockdowns at the start of the pandemic, leading to the price of oil to nosedive. Gas prices rallied a year ago as the economy reopened and demand increased. OPEC agreed to increase oil production in July, but the supply still hasn’t caught up to higher demand, according to De Haan, in part because of an oil crunch in China and a natural gas shortage in Europe.
“Throughout 2021, but specially this summer and fall, demand has outpaced supply significantly, and that has provided the catalyst for why oil and gas prices have continued to go up,” he said.
De Haan accused the White House of seemingly “picking and choosing” figures, arguing the price of oil has not been on a sustained decline long enough for gas stations to reduce prices for customers.
“The president, of course, has to at least insinuate that he’s doing something about it or looking into it,” De Haan said, but added, “There’s not a whole lot of meat behind what he’s saying.”
Contributing: Nathan Bomey. Reach Joey Garrison on Twitter @joeygarrison