Biden asks FTC to investigate oil, gas companies' role in high prices at the pump

US President Joe Biden has called on the Federal Trade Commission to take immediate action to determine whether oil and gas companies have engaged in "illegal conduct" aimed at keeping prices at the pump high.

"I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct," Biden said in a Nov. 17 letter to FTC Chair Lina Khan.

In the letter, Biden asserted there is "mounting evidence of anti-consumer behavior" by the oil and gas industry, which has seen its costs decline and profits surge as gasoline prices have reached seven-year highs.

The US Energy Information Administration expects average regular-grade gasoline prices to peak in November at $3.32/gal, the highest since September 2014.

"In the last month, the price of unfinished gasoline is down more than 5%, while gas prices at the pump are up 3% in that same period," said Biden, noting there is usually a correlation in those prices as unfinished gasoline is the main ingredient in gas bought at the pump. "This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average."

White House Deputy Press Secretary Chris Meagher told reporters "if the gap between refined fuel costs and pump prices were at typical pre-pandemic levels, we'd be looking at prices at the pump that are 25 cents less per gallon."

And Biden further pointed out that the two largest US oil and gas companies -- ExxonMobil and Chevron, based on market capitalization -- "are on track to nearly double their net income" from pre-pandemic levels and are planning billions of dollars of stock buybacks and dividends for this and the coming year.

FTC actions

Khan previously stepped up FTC's scrutiny of oil and gas sector mergers, particularly for retail fuel station mergers, in response to a White House request in August to monitor the US gasoline market following gasoline price spikes. She also committed at that time to crackdown on unlawful conduct and potential gaps in FTC oversight that may have allowed price coordination and other collusive practices.

Biden said he appreciated that effort, but because gasoline prices have continued to rise, the FTC must "further examine what is happening with oil and gas markets" and "bring all of the commission's tools to bear if you uncover any wrongdoing."

That agency has the authority to conduct wide-ranging studies and compel companies to file reports or written answers to questions about their conduct and practices. With that authority, Meagher said the FTC could "obtain data on how companies set gas prices as well as data on actual pricing," as examples of next steps the FTC could take.

"The FTC is concerned about this issue, and we are looking into it," agency spokesperson Lindsay Kryzak said in an email.

Industry pushback

The American Petroleum Institute blasted Biden's letter as "a distraction from the fundamental market shift that is taking place and the ill-advised government decisions that are exacerbating this challenging situation."

API maintains that the current high-price environment is a result of demand outpacing supply as the economy rapidly recovered from the sudden downturn caused by the global pandemic. That imbalance has been further impacted by the Biden administration's policies restricting access to domestic oil and gas supplies and canceling related infrastructure projects, the trade group asserts.

"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," Frank Macchiarola, API's senior vice president for policy, economics and regulatory affairs, said in a statement.

A research note from ClearView Energy Partners contended that "the White House may be focused as much on political signals -- blaming oil companies and refiners for high prices, perhaps to counteract Republicans blaming the White House climate agenda -- as economic substance."

White House options

Intense lobbying from the US and other consuming countries failed to persuade OPEC+ to put more crude supply on the market, with those producers holding firm to their decision to increase output by a modest 400,000 b/d per month.

An emergency release from the Strategic Petroleum Reserve has been floated among the few options available to the White House to ease the pain at the pump. But EIA Acting Administrator Stephen Nalley recently told lawmakers that any relief from an SPR drawdown would be short-lived and likely only amount to a 5-10 cents/gal temporary dip in prices.

Meagher said all options remained on the table as the president has committed "to do everything within his control" to get a handle on soaring prices.

US oil production remains dented by the 2020 demand plunge and capital flight. The country was pumping about 11.4 million b/d of crude in October, according to the latest estimate from the EIA. Output remains about 1.5 million b/d below the pre-pandemic peak in November 2019, but is expected to rise to an annual output averaging 11.9 million b/d in 2022.

The EIA also expects US gasoline prices to ease to $3.15/gal in December and $3.02/gal in January, with prices averaging $3/gal for the first half of 2022.