Could President Biden Declare Oil Giants Operating in Conflict with National Security Interests Due to Price Gouging?

In the United States, our capitalist system has been praised and celebrated for allowing corporations, including the oil industry, to thrive. Over the past two years, US oil companies have seen record-breaking profits despite the challenges posed by the global pandemic. This raises significant questions about the ethical and national security implications of oil industry practices in an era of rising energy costs.

Record-Breaking Profits: An Unlikely Celebration

Since 2021, oil companies have continuously posted record-breaking profits. ExxonMobil, Chevron, Shell, and BP, among others, have seen their profits soar, with ExxonMobil alone making a record profit of $23 billion in 2021. However, the profits gained in 2021 came after each company experienced severe financial losses due to the pandemic in 2020. These profits, gained through a mix of higher prices and strategic financial decisions, have contributed to a scrutiny of their motives and actions.

The Motivation Behind Reduced Production

A notable aspect of these record-breaking profits is the decision by major oil companies to limit production despite high demand and rising gas prices. Some industry insiders argue that these companies have chosen to invest in stock buybacks instead of increasing production, as buybacks provide immediate returns to shareholders. Nearly 60% of oil industry executives claim that they are not increasing production due to investor pressure to maintain capital discipline, which is another way of saying they prioritize profits over supply.

Stock Buybacks: Putting Money Back in Pockets

Since the start of 2021, the largest oil and gas companies have collectively completed stock buybacks worth $45.6 billion. These buybacks have been a significant contributor to the companies' high profits. Despite the collective efforts to maximize shareholder returns, this strategy has led to higher prices for consumers and raised concerns about the economic and societal impacts of these practices.

Quarterly Earnings: Unprecedented Success

The consistent and unprecedented success of major oil companies is evident in their quarterly earnings reports for 2022. Across the four major oil companies, combined quarterly earnings nearly reached $50 billion in the first quarter of 2022 alone. ExxonMobil alone reported a record-breaking earnings of $17.9 billion for the quarter, the highest in the company's history. These figures not only reflect the financial prowess of the oil industry but also highlight the economic disparity they have created, with record-shattering profits coming at the cost of hardworking American families.

The Investor Perspective: Profits Over People

According to a Dallas Federal Reserve survey, nearly 60% of oil industry executives cited "investor pressure to maintain capital discipline" as the primary reason for not increasing oil production, despite soaring gas prices. Only a small number mentioned environmental, social, or governance (ESG) issues, with only 8% citing financing difficulties, and 15% giving other reasons. This emphasis on capital discipline over public interest suggests a narrow focus on maximizing shareholder value at the expense of broader societal welfare.

Conclusion: National Security Implications

The question arises whether the practices of major oil companies align with the national security interests of the United States. The economic well-being and security of a nation are closely intertwined with the stability and affordability of its energy sector. The consistent refusal to increase supply despite high demand and rising prices raises concerns about the long-term implications of such practices on national security and economic stability.

Is it time for President Biden to declare that oil companies are operating in conflict with national security interests due to price gouging? The evidence suggests that the current dynamics of the oil industry may indeed pose a significant challenge to the nation's economic and social stability. As the debate continues, one thing is clear: the actions of oil giants will continue to be a focal point in the conversation about national security and economic policies in the United States.