Biden faults lack of new drilling by ExxonMobil

President Joe Biden is ramping up criticism of the oil sector for holding back on investment on new production, as record-high gasoline prices become a growing political liability for Democrats.

Biden, in remarks during a visit to the Port of Los Angeles in California, singled out ExxonMobil as an example of an oil company keeping its capital expenditures flat, despite higher profits as Nymex WTI crude futures climbed to $120/bl from $72/bl in December.

"We're gonna make sure that everybody knows Exxon's profits," Biden said. "Exxon made more money than God this year."

ExxonMobil in late April reported a $5.5bn profit in the first quarter and said that its quarterly capital expenditures declined to $4.9bn, from $5.8bn in the fourth quarter. ExxonMobil plans to spend $20bn-$25bn/yr through 2027, it said late last year.

ExxonMobil did not immediately respond to a request for comment.

High gasoline prices and inflation have added to political headwinds against Democrats heading into midterm elections, while increasing the difficulty for Democrats to reach a budget deal expected to include clean energy tax credits. Biden has blamed the jump in fuel prices largely on Russia's invasion of Ukraine but says oil companies are not doing enough to increase production.

"One thing I want to say about the oil companies," Biden said. "They're not drilling. Why aren't they drilling? Because they make more money not producing more oil. The price goes up."

Biden's criticism toward the oil sector comes as retail fuel prices continue to set new records, hitting $4.88/USG for regular grade gasoline in the week ending 6 June, according to the US Energy Information Administration. Fuel prices have been a leading contributor to rising price inflation, which hit a four-decade high of 8.6pc annually in May.

The White House has repeatedly urged domestic producers to increase production

Biden said that oil companies are holding back on new investment partly so they can reward investors through share repurchases. ExxonMobil on 29 April said it would triple the size of its existing share buyback program to $30bn through 2023.

North American oil and gas producers are poised to increase capital spending by 26pc this year after two years of limited investment, but that will lead to just a 4pc increase in output volume, credit ratings service Moody's said in a research note on 6 June. Inflation, supply chain issues, labor shortages and shareholder demands for capital discipline are likely to constrain volume growth through at least 2023, it said.

US producers have been able to rake in substantial profits despite facing rising operating costs. The price of crude in the first months of this year has averaged $95/bl, 53pc higher than than the average $62/bl cost of production, economists at the Kansas City Federal Reserve said in a report published 23 May.

By Chris Knight