Exxon made more money than God amid record inflation, Biden says

US President accused energy companies of capitalising on a supply shortage to fatten profits

US President Joe Biden delivers a speech on the USS Iowa in the Port of Los Angeles in California. EPA

US President Joe Biden on Friday accused the US oil industry, and Exxon Mobil in particular, of capitalising on a supply shortage to fatten profits after a report showed inflation surging to a 40-year record.

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

Mr Biden, who came into office vowing to reduce US dependence on fossil fuels, said on Friday he was hoping to speed up oil production, which is expected to hit record highs in the US next year.

But he also issued a warning to the industry, whose profits have jumped with oil and gas prices, pointing to the gains as evidence consumers are paying for more than higher labour and shipping costs.

“Exxon made more money than God this year,” Mr Biden told reporters following a speech to dockworker union representatives at the Port of Los Angeles.

US oil companies are not using higher profits to drill more but to buy back stock, he added.

Share buy-backs improve earnings per share by reducing the number of shares outstanding, indirectly helping to boost share prices. Companies see buy-backs as a way to reward investors.

“Why aren't they drilling? Because they make more money not producing more oil,” Mr Biden said. “Exxon, start investing and start paying your taxes.”

Exxon pushed back at the comments, saying it has continued to increase its US oil, petrol and diesel production, and had borrowed heavily to increase output while suffering losses in 2020.

“We have been in regular contact with the administration, informing 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 per cent in its West Texas shale holdings, he said, where it expects to add 25 per cent more output this year after adding 190,000 barrels to oil production last year.

A Texas refinery expansion will add the equivalent of a “new medium sized refinery”, Mr Norton said.

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

The president defended his economic and job creation record and deflected blame for inflation, which spiked 8.6 per cent in the year to May according to a new Labour Department report.

In a Democratic campaign fund-raising event in Beverly Hills, California, that evening, Mr Biden sounded a cautious tone about the prospects for inflation.

“We're gonna live with this inflation for a while,” he said. “It's gonna come down gradually, but we're going to live with it for a while.”

Mr Biden earlier had chided 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 earnings in February. After halting share buy-backs several years ago, it resumed them this year and pledged to spend up to $30bn through next year.

Numerous companies have said they are holding down spending that could boost oil output to lower $100-plus per barrel oil prices, because that is what investors are demanding.

The surging costs have become a political headache for the Biden administration, which has tried several measures to lower prices. These include a record release of barrels from US strategic reserves, waivers on rules related to the production of summer fuel, and leaning on major Opec countries to boost output.

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

Shipping companies made $190bn in profit, a seven-fold increase in one year, Mr Biden said. The situation made him so “viscerally angry” that he wanted to “pop them”, he added.