Los Angeles (Reuters) – After a report showed that inflation had reached a new 40-year high, US President Joe Biden said that the US oil industry, and Exxon Mobil Corp in particular, were taking advantage of a shortage of oil to make more money.
In May, gasoline prices hit a record high and food prices went through the roof, which led to the biggest annual rise in prices in 40 years. AAA, a group of drivers, says that the average price of a gallon of regular gas across the country on Friday was $4.99.
Biden promised when he took office to make the US less reliant on fossil fuels. On Friday, he said he wanted to speed up oil production, which is expected to reach record highs in the US next year.
But he also gave a warning to the industry, whose profits have gone up with the price of oil and gas. He said that the rise in profits shows that consumers are paying for more than just higher labour and shipping costs.
“This year, Exxon made more money than God,” Biden told reporters after speaking to union leaders at the Port of Los Angeles. He also said that US oil companies are not using their higher profits to drill more, but rather to buy back their own stock.
Share buybacks increase earnings per share by reducing the number of shares that are still in circulation. Indirectly, this helps to raise the price of each share. Buybacks are seen as a way for companies to thank their investors.
“Why don’t they just drill? Because they make more money when they don’t make as much oil, “Biden said.” “Exxon, you need to start making investments and paying your taxes.”
Exxon responded to the comments by saying that it has been increasing its oil, gasoline, and diesel production in the US and that it has borrowed a lot of money to do so, even though it will lose money in 2020.
A spokesman named Casey Norton said, “We have been in regular contact with the administration and have told them about the investments we plan to make to increase production and refinery capacity in the United States.”
Exxon will spend 50% more on its West Texas shale holdings, where it hopes to increase oil production by 25% after adding 190,000 barrels last year, he said.Norton said that an upcoming Texas refinery expansion will add the same amount of space as a “new medium-sized refinery.”
Exxon, the biggest oil company in the US, lost about $20 billion and had to borrow more than $30 billion to keep running. It paid taxes of $40.6 billion last year, which is $17.8 billion more than it will pay in 2020, he said.
During a trip to the Port of Los Angeles, where he spoke, the president defended his record on the economy and job creation and shifted the blame for inflation, which jumped 8.6% in the year to May, according to a new Labor Department report.
At a fundraiser for the Democratic Party that night in Beverly Hills, Biden was cautious about the future of inflation. He said, “We’re going to live with this inflation for a while.” “It will go away slowly, but we’ll have to deal with it for a while.”
Biden had previously said that the US oil, gas, and refining industries were using “the challenge caused by the war in Ukraine as an excuse to make things worse for families by taking too much profit or raising prices.”
When Exxon reported its fourth-quarter earnings in February, they were the highest in seven years. Several years ago, it stopped buying back its own shares. This year, it started doing it again and promised to spend up to $30 billion on it through next year.
Investors want oil prices to go down from $100 or more per barrel, so many companies say they are holding back on spending that would increase oil production.
Rising prices have become a political problem for the Biden administration, which has tried a number of things to bring prices down. These include releasing a record number of barrels from the US’s strategic reserves, relaxing rules about how summer gasoline is made, and putting pressure on major OPEC countries to increase output.
In his speech on Friday, Biden asked Congress to pass laws that would cut the cost of energy, prescription drugs, and shipping.
Biden said at the port that shipping companies made $190 billion in profits, which is a seven-fold rise in just one year. He said that the situation made him so angry that he wanted to “pop them.”
