Produce more gas, less profit
(AP) – President Joe Biden called on Wednesday American oil refiners to produce more gasoline and diesel, saying their profits tripled during a period of war between russia and ukraine as Americans grapple with record high prices at the pump.
“The crisis facing families deserves immediate action,” Biden wrote in a letter to seven oil refiners. “Your companies must work with my administration to come up with concrete short-term solutions that respond to the crisis.”
National gas prices average about $5 per gallonan economic burden for many Americans and a political threat to the president’s Democratic colleagues mid-term elections. Broader inflation began to rise last year as the US economy recovered from the coronavirus pandemicbut it has accelerated in recent months with rising energy and food prices after Russia invaded Ukraine in February and disrupted global commodity markets.
The government announced on Friday that consumer prices had jumped 8.6% a year ago, the worst increase in more than 40 years.
The letter notes that gasoline prices averaged $4.25 a gallon when oil was last near the current price of $120 a barrel in March. This 75-cent difference in average gas prices in just a few months reflects both a shortage of refining capacity and profits that “are currently at their highest levels on record,” the letter said.
The American Petroleum Institute, which represents the industry, said in a statement that capacity had been reduced as the Biden administration sought to move away from fossil fuels as part of its climate change agenda.
The White House has said expected bilateral talks on boosting oil production are just part of Biden’s trip to Saudi Arabia next month. (CNN, MSNBC)
“While we welcome the opportunity to engage in increased dialogue with the White House, the administration’s misguided policy agenda away from domestic oil and natural gas has aggravated inflationary pressures and added headwinds. companies’ daily efforts to meet growing energy needs while reducing emissions,” API CEO Mike Sommers said in a statement.
Sommers added, “I reinforced yesterday in a letter to President Biden and his cabinet ten significant policy actions to ultimately ease the pain at the pump and strengthen national security, including approving critical energy infrastructure, the improving access to capital, conducting energy lease sales, among other pressing priorities.
The letter is unlikely to trigger a chain of events that would boost supplies. Refineries have undergone unscheduled maintenance unprecedented in the world over the past three months and extreme shortages are being felt around the world, said Claudio Galimberti, senior vice president of Rystad Energy. China’s decision to limit its petroleum product exports has also contributed to the problem, he said.
“US refiners cannot increase capacity beyond current levels,” Galimberti said. “If they could, they would have done it already.”
According to Biden, 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, but the claim may have some resonance with voters.
Some Liberal lawmakers have proposed cracking down on corporate profits amid rising inflation. Senator Bernie Sanders, an independent from Vermont, in March proposed a 95% tax on profits exceeding pre-pandemic corporate averages.
The president has harshly criticized what he sees as profiteering amid a global crisis that could potentially push Europe and other parts of the world into recession, saying after a speech friday that ExxonMobil “made more money than God this year”. ExxonMobil responded by saying it had already informed the administration of its planned investments to increase oil production and refining capacity.
“There is no doubt that (Russian President) Vladimir Putin is primarily responsible for the intense financial pain being suffered by the American people and their families,” Biden’s letter reads. “But amid a war that has driven gasoline prices more than $1.70 a gallon, historically high refinery profit margins are compounding that pain.”
The letter states that the administration is prepared to “use all reasonable and appropriate tools of the federal government and emergency authorities to increase refinery capacity and production in the near term, and to ensure that each region of this country is adequately supplied”. He notes that Biden has already released oil from the U.S. strategic reserve and increased ethanol blending standards, though neither of those actions put lasting downward pressure on prices.
There is little the government can do to bring prices down except release oil from the strategic reserve, and it has already been done, said Jim Burkhard, vice president of IHS Markit. If Biden hadn’t done that, prices would be even higher today, he added.
“No government can simply create new supplies,” Burkhard said. “One thing that might help would be to have a more constructive relationship with the US oil industry, because it has been somewhat adversarial so far.”
The president sent the letter to Marathon Petroleum, Valero Energy, ExxonMobil, Phillips 66, Chevron, BP and Shell.
He also headed the Energy Secretary Jennifer Granholm to call an emergency meeting and consult with the National Petroleum Council, a federal advisory group 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 companies to provide “any concrete ideas that would address immediate inventory, price and refining capacity issues in the coming months, including transportation measures to get the refined product to market.” “.
There may be limits to the additional capacity that can be added. The US Energy Information Administration Friday of the estimates published that “refinery utilization will hit a monthly average of 96% twice this summer, near the upper limits of what refiners can sustain consistently.”
The letter says about 3 million barrels per day of refining capacity worldwide has been taken offline since the pandemic began. In the United States, refining capacity fell by more than 800,000 barrels per day in 2020.
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