Profit companies

Faced with record inflation, Biden berates Exxon and oil companies for profits

U.S. President Joe Biden speaks during the opening plenary session of the Ninth Summit of the Americas in Los Angeles, California, U.S., June 9, 2022. REUTERS/Daniel Becerril

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LOS ANGELES, June 10 (Reuters) – U.S. President Joe Biden on Friday accused the U.S. oil industry, and Exxon Mobil Corp (XOM.N) in particular, of capitalizing on a supply shortage to inflate profits after a report showed inflation rising to a new 40-year high.

U.S. consumer inflation accelerated in May as gasoline prices hit a record high and food costs soared, leading to the largest annual increase in four decades. A gallon of regular gasoline costs an average of $4.99 nationwide on Friday, according to the AAA motoring group.

Biden, who took office promising to reduce the United States’ dependence on fossil fuels, said on Friday he hoped to ramp up oil production, which is expected to reach record levels in the United States next year.

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But he also issued a warning to the industry, whose profits have surged with oil and gas prices, pointing to the gains as evidence that consumers are paying more than labor and shipping costs. students.

“Exxon has made more money than God this year,” Biden told reporters after a speech to dockers’ union representatives at the Port of Los Angeles. US oil companies are not using their higher profits to drill more, but to buy back stock, he added.

Share buybacks improve earnings per share by reducing the number of shares outstanding, indirectly helping to drive up stock prices. Companies view buyouts as a way to reward investors.

“Why don’t they drill? Because they make more money without producing more oil,” Biden said. “Exxon, start investing and start paying your taxes.”

Exxon pushed back on the comments, noting that it has continued to increase its U.S. production of oil, gasoline and diesel, and has borrowed heavily to boost production while suffering losses in 2020.

“We have been in regular contact with the administration, advising them of our planned investments to increase production and expand refining capacity in the United States,” spokesman Casey Norton said.

Exxon will increase spending by 50% in its West Texas shale holdings, it said, where it plans to add 25% more production this year after adding 190,000 barrels to oil production Last year. An ongoing expansion of the Texas refinery will add the equivalent of a “new mid-size refinery,” Norton said.

Exxon, the largest US oil producer, lost some $20 billion in 2020 and had borrowed more than $30 billion to finance its operations. It paid $40.6 billion in taxes last year, $17.8 billion more than in 2020, he said.

The president spoke during a visit to the Port of Los Angeles, where he defended his economic and job creation record and deflected blame for inflation, which soared 8.6% in May according to a new report from the Department of Labor.

At a Democratic campaign fundraising event in Beverly Hills that evening, Biden sounded a cautious tone about the outlook for inflation going forward: “We’re going to live with this inflation for a while.” , did he declare. “It’s going to come down gradually, but we’re going to live with it for a while.”

Biden had earlier chastised the US oil, gas and refining industries for using “the challenge created by the war in Ukraine as a reason to make things worse for families with excessive profit taking or price hikes. “.

Exxon posted its biggest quarterly profit in seven years when it reported fourth quarter results in February. After halting share buybacks several years ago, it resumed them this year and pledged to spend up to $30 billion through next year.

Many companies have said they are withholding spending that could depress oil production to lower oil prices more than $100 a barrel because that is what investors are demanding. Read more

Soaring costs have become a political headache for the Biden administration, which has tried several measures to bring prices down. These include a record release of barrels from U.S. strategic reserves, waivers of rules related to summer gasoline production and relying on major OPEC countries to increase production.

Biden, in his remarks on Friday, urged Congress to pass legislation to reduce energy, prescription drugs and shipping costs.

Shipping companies made $190 billion in profits, a sevenfold increase in one year, Biden said at the port. The situation made him so “viscerally angry” that he wanted to “pop them”, he said.

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Reporting by David Gaffen in New York, Kanishka Singh in Washington; edited by Heather Timmons, John Stonestreet, Richard Chang and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.