Joe Biden tells oil refiners: Produce more gas, fewer profits
President Joe Biden on Wednesday called on U.S. oil refiners to produce more gasoline and diesel, saying their profits have tripled during a time of war between Russia and Ukraine as Americans struggle with record-high prices at the pump. “The crunch that families are facing deserves immediate action,” Biden wrote in a letter to seven oil refiners. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.” Gas prices nationwide are averaging roughly $5 a gallon, an economic burden for many Americans and a political threat for the president’s fellow Democrats going into the midterm elections. Broader inflation began to rise last year as the U.S. economy recovered from the coronavirus pandemic, but it accelerated in recent months as energy and food prices climbed after Russia invaded Ukraine in February and disrupted global commodity markets. The government reported on Friday that consumer prices had jumped 8.6% from a year ago, the worst increase in more than 40 years. The letter notes that gas prices were averaging $4.25 a gallon when oil was last near the current price of $120 a barrel in March. That 75-cent difference in average gas prices in a matter of just a few months reflects both a shortage of refinery capacity and profits that “are currently at their highest levels ever recorded,” the letter states. The American Petroleum Institute, which represents the industry, said in a statement that capacity has been diminished as the Biden administration has sought to move away from fossil fuels as part of its climate change agenda. “While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” API CEO Mike Sommers said in a statement. Sommers added, “I reinforced in a letter to President Biden and his Cabinet yesterday ten meaningful policy actions to ultimately alleviate pain at the pump and strengthen national security, including approving critical energy infrastructure, increasing access to capital, holding energy lease sales, among other urgent priorities.” The letter is unlikely to start a chain of events that would boost supplies. Refineries have gone through unprecedented, unplanned maintenance globally in the last three months and there is an extreme shortage being felt across the globe, said Claudio Galimberti, senior vice president at Rystad Energy. China’s decision to limit its exports of oil products also contributed to the problem, he said. “U.S. refiners cannot increase capacity beyond current levels,” Galimberti said. “If they could, they would have done it already.” As Biden sees it, refineries are capitalizing on the uncertainties caused by “a time of war.” His message that corporate greed is contributing to higher prices has been controversial among many economists, yet the claim may have some resonance with voters. Some liberal lawmakers have proposed cracking down on corporate profits amid the higher inflation. Sen. Bernie Sanders, a Vermont independent, in March proposed a 95% tax on profits in excess of companies’ pre-pandemic averages. The president has harshly criticized what he views as profiteering amid a global crisis that could potentially push Europe and other parts of the world into a recession, saying after a speech Friday that ExxonMobil “made more money than God this year.” ExxonMobil responded by saying it has already informed the administration of its planned investments to increase oil production and refining capacity. “There is no question that (Russian President) Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing,” Biden’s letter says. “But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain.” The letter says the administration is ready to “use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied.” It notes that Biden has already released oil from the U.S. strategic reserve and increased ethanol blending standards, though neither action put a lasting downward pressure on prices. There’s little the government can do to lower prices, other than release oil from the strategic reserve, and that’s already been done, said Jim Burkhard, vice president at IHS Markit. If Biden had not done that, prices would be even higher today, he added. “No government can simply conjure up new supply,” Burkhard said. “One thing that may help would be to have a more constructive relationship with the U.S. oil industry, because it’s been somewhat antagonistic so far.” The president sent the letter to Marathon Petroleum, Valero Energy, ExxonMobil, Phillips 66, Chevron, BP, and Shell. He also has directed Energy Secretary Jennifer Granholm to convene an emergency meeting and consult with the National Petroleum Council, a federal advisory group that is drawn from the energy sector. Biden is asking each company to explain to Granholm any drop in refining capacity since 2020, when the pandemic began. He also wants the companies to provide “any concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months — including transportation measures to get refined product to market.” There may be limits on how much more capacity can be added. The U.S. Energy Information Administration on Friday released estimates that “refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain.” The letter says that roughly 3 million barrels a day of refining capacity around the world have gone offline since the pandemic began. In the U.S., refining capacity fell by more than 800,000 barrels a day in 2020. Republished with the permission of The Associated Press.
Fighting gas prices, U.S. to release 50 million barrels of oil
President Joe Biden on Tuesday ordered a record 50 million barrels of oil released from America’s strategic reserve, aiming to bring down gasoline and other costs, in coordination with other major energy-consuming nations including India, the United Kingdom, and China. The U.S. action is focused on helping Americans cope with higher fuel and other prices ahead of Thanksgiving and winter holiday travel. Gasoline prices are at about $3.40 a gallon, more than 50% higher than a year ago, according to the American Automobile Association. “While our combined actions will not solve the problems of high gas prices overnight, it will make a difference,” Biden promised in remarks at the White House. “It will take time, but before long, you should see the price of gas drop where you fill up your tank.” The government will begin to move barrels into the market in mid-to-late December. Gasoline usually responds at a lag to changes in oil prices, and administration officials suggested this is one of several steps toward ultimately bringing down costs. Oil prices had dropped in the days ahead of the announced withdrawals, a sign that investors were anticipating the moves that could bring a combined 70 million to 80 million barrels of oil onto global markets. But in trading after the announcement, prices shot up roughly 2% instead of falling. The market was expecting the news, and traders may have been underwhelmed when they saw the details, said Claudio Galimberti, senior vice president for oil markets at Rystad Energy. “The problem is that everybody knows that this measure is temporary,” Galimberti said. “So once it is stopped, then if demand continues to be above supply like it is right now, then you’re back to square one.” Shortly after the U.S. announcement, India said it would release 5 million barrels from its strategic reserves. The British government confirmed it will release up to 1.5 million barrels from its stockpile. Japan and South Korea are also participating, and U.S. officials said it’s the biggest coordinated release from global strategic reserves. British Prime Minister Boris Johnson’s spokesman, Max Blain, said it was “a sensible and measured step to support global markets” during the pandemic recovery. Blain added that the country’s companies will be authorized but not compelled to participate in the release. Despite all the optimistic statements, the actions by the U.S. and others risk counter moves by Gulf nations, especially Saudi Arabia, and by Russia. Saudi Arabia and other Gulf countries have made clear they intend to control supply to keep prices high for the time being. As word spread in recent days of a coming joint release from the U.S. and other countries’ reserves, there were warnings from OPEC interests that those countries may respond in turn, reneging on promises to increase supplies in coming months. Wyoming Sen. John Barrasso was among Republicans who criticized Biden’s announcement. The No. 3 Senate Republican said the underlying issue is restrictions on domestic production by the administration. “Begging OPEC and Russia to increase production and now using the Strategic Petroleum Reserve are desperate attempts to address a Biden-caused disaster,” Barrasso said. “They’re not substitutes for American energy production.” Biden has scrambled to reshape much of his economic agenda around the issue of inflation, saying that his recently passed $1 trillion infrastructure package will reduce price pressures by making it more efficient and cheaper to transport goods. Republican lawmakers have hammered the administration for inflation hitting a 31-year high in October. The consumer price index has soared 6.2% from a year ago — the biggest 12-month jump since 1990. The Strategic Petroleum Reserve is an emergency stockpile to preserve access to oil in case of natural disasters, national security issues, and other events. Maintained by the Energy Department, the reserves are stored in caverns created in salt domes along the Texas and Louisiana Gulf Coasts. There are roughly 605 million barrels of petroleum in the reserve. The Biden administration argues that it is the right tool to help ease the supply problem. Americans used an average of 20.7 million barrels a day during September, according to the Energy Information Administration. That means that the release equals about two-and-a-half days of additional supply. “Right now, I will do what needs to be done to reduce the price you pay at the pump,” Biden said at the White House. He said the administration also is looking into potential price gouging by gas companies squeezing customers while making money off the lowered oil costs. Energy Secretary Jennifer Granholm, too, said U.S. companies are part of the problem, keeping production below pre-pandemic levels in order to increase profits. The coronavirus pandemic roiled energy markets everywhere. As it bore down and economic activity sank in April of last year, energy demand collapsed, and oil futures prices turned negative. Energy traders did not want to get stuck with crude that they could not store. But as the economy recovered, production lagged, and prices jumped to a seven-year high in October. U.S. production has not recovered. Energy Information Administration figures indicate that domestic production is averaging roughly 11 million barrels daily, down from 12.8 million before the pandemic. Americans are feeling the squeeze. For Matt Hebard of Agoura Hills, California, it’s taking $80 to gas up his SUV. “Gas prices are definitely on everyone’s minds right now,” he said as he filled up at a station in his suburb northwest of Los Angeles. He hoped the president’s move has a good long-term effect. Sy Amber, meanwhile, was en route to Las Vegas from his California home. Unhappily spending more money filling up his car, he said he didn’t expect Biden’s action to work and didn’t agree with them. “I’m not happy with our president,” he said. Republicans in Congress are pointing to Biden’s efforts to minimize drilling and support renewable energy as a reason for the decreased production, though there are multiple market dynamics at play as fossil fuel prices are higher around the world. Biden and administration officials insist that tapping more oil from the
