By Trevor Hunnicutt and Jarrett Renshaw
WASHINGTON (Reuters) -US President Joe Biden on Wednesday demanded oil refining companies to explain why they are not putting more gasoline on the market, sharply escalating his rhetoric against the industry as he faces pressure over rising prices.
Biden wrote to executives from Marathon Petroleum Corp (NYSE :), Valero Energy Corp (NYSE 🙂 and Exxon Mobil Corp (NYSE 🙂 and complained they had cut back on oil refining to pad their profits, according to a copy of the letter https://docsend.com/view/qpg3e8a2s3fbxi3a seen by Reuters.
The letter was also being sent to Phillips 66 (NYSE :), Chevron Corp (NYSE :), BP (NYSE 🙂 and Shell (LON :), a White House official, who declined to be identified, told Reuters.
“At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Biden wrote, adding the lack of refining was driving gas prices up faster than oil prices.
Biden said the industry’s lack of action is blunting the administration’s attempts to offset the impact of oil-rich Russia’s invasion of Ukraine, such as releases from US oil reserves and adding more cheaper ethanol to gasoline.
Meanwhile, energy companies are enjoying bumper profits as the invasion has added to a supply squeeze which has driven crude prices above $ 100 a barrel, and as fuel demand has remained robust, despite record high gasoline prices.
US refining capacity peaked in April 2020 at just under 19 million barrels per day (bpd), as refiners shut several unprofitable facilities during the coronavirus pandemic. As of March, refining capacity was 17.9 million bpd, but there have been other closures announced since.
US refiners are running at near-peak levels to process fuel – currently at 94% of capacity – and say there is little they can do to quickly satisfy Biden’s demands.
“Our refineries are running full out,” Bruce Niemeyer, corporate vice president of strategy and sustainability at Chevron, told Reuters on the sidelines of a New York energy transition conference on Tuesday before the letter was made public.
Shell is “producing at capacity” and looking at options to increase oil and gasoline production, a spokesperson said, while Valero said it remains “committed to working with the government to ensure consumers have access to reliable and affordable energy.”
Exxon, which was the focus of the president’s ire against oil companies last week, has invested to expand its refining capacity by 250,000 barrels per day, the equivalent of a medium-sized refinery, said spokesman Todd Spitler.
The administration in the short term could lift the Jones Act provisions that force domestic shippers to use US flagged vessels that employ union union and also lift regulations that prohibit the use of cheaper, smog causing components in summer blends of gasoline, Spitler said.
The other companies sent the letter did not respond to a request for comment.
INFLATION WOES
Biden has been intensifying attacks against oil companies as gas pump prices race to record highs above $ 5 per gallon and inflation surges to a 40-year record.
Privately, White House officials have been reaching out to refiners to inquire about idled plants and spare capacity and whether there are other ways to increase gasoline supply, according to two sources familiar with the discussions.
Rising gas prices have helped drive unexpectedly persistent consumer price inflation and voter anger before Nov. 8 midterm elections where Biden’s Democratic Party is defending its control of Congress.
US consumer inflation unexpectedly accelerated in May, leading to the largest annual increase in four decades. White House officials have hotly debated how to respond to a problem they once thought would fade and now see as largely out of their control.
Biden has attributed rising oil prices primarily to US-led sanctions that took Russian energy supplies off the global market after its invasion of Ukraine.
But he has also taken the fight to major oil companies, which are riding rising energy prices to record earnings, and giving those profits to investors rather than spending on new drilling and refining capacity.
“Exxon made more money than God this year,” Biden said last week, referring to the major’s first quarter profit doubling from the previous year’s to $ 5.48 billion.
Exxon’s Spitler said the top US producer has invested more than $ 50 billion over the past five years that resulted in a nearly 50% increase in US oil output.
US Energy Secretary Jennifer Granholm plans to host an emergency meeting on how refiners can respond to higher prices, Biden said, asking for a response from the oil companies beforehand.
Biden said they should provide “concrete ideas” to increase oil refining along with an explanation for why they may have cut such capacity in the last two years.