Biden slams top refiners for making super-high profits to push up U.S. gasoline prices, gets backlash

In the process of finding the culprit of high oil prices, the White House has pointed the finger at another “villain” besides Russia: oil refiners.

U.S. President Biden recently sent a letter to the bosses of seven top oil companies, calling the refiners’ super-high profits “unacceptable” and “There is no doubt that Vladimir Putin is responsible for the enormous economic pain suffered by the American people and their families. Primary responsibility. But with gasoline prices rising by more than $1.70 a gallon during the war, the pain is being compounded by the unprecedentedly high profit margins of refiners.” Biden said he would use “all reasonable and appropriate federal government tools and emergency measures. “Increase refining capacity and output, calling on oil companies to “take immediate action” to supply more fuel.

The seven oil companies that received the letter – Marathon Petroleum Corp, Valero Energy Corp, ExxonMobil, Phillips 66, Chevron ), the heads of BP and Shell were also asked to explain the decline in refining capacity since 2020.

As gasoline and diesel prices continue to soar across the United States, Biden has stepped up efforts to deal with soaring oil prices. U.S. gasoline prices have more than doubled since Biden took office, and last week the average U.S. gallon of regular unleaded gasoline topped $5 for the first time. While U.S. gasoline prices remain well below Europe’s, high oil prices have fueled high inflation that has hit a 40-year high and dented Biden’s approval ratings ahead of the crucial midterm elections. To suppress oil prices, Biden has repeatedly called on OPEC+ producers and U.S. shale producers to increase supply and release strategic oil reserves in record numbers. But these moves cannot rewrite the tight supply pattern in the global crude oil market.Biden slams top refiners for making super-high profits to push up U.S. gasoline prices, gets backlash -Biden-slams-top-refiners-for-making-super-high-profits-to-push

Wholesale diesel prices (left axis of black line) and refiner profit margins (right axis of orange line). In the search for the culprit of high oil prices, the White House has turned the finger on refiners.

Biden wrote in the letter that the sharp rise in gasoline prices was not only driven by higher crude oil prices, but also stemmed from an unprecedented “disconnection” between the two. “The last time crude was around $120 a barrel was in March when gasoline was at $4.25 a gallon. But today, gasoline is up 75 cents and diesel is up 90 cents.” He attributed that Because of refiners’ profits. “Refiners’ profits from refining gasoline and diesel have tripled since the start of the year and are now at their highest levels on record… In times of war, it is impossible to pass on much higher-than-normal refinery margins directly to American households. accepted.”

Since March this year, Biden has repeatedly blamed the epidemic and Russian President Vladimir Putin for rising gasoline prices in the United States. The oil industry has been the main target of the White House’s recent accusations on the issue. Not long ago, Biden specifically blamed Exxon Mobil at an event at the Port of Los Angeles, slamming the company for “making more money than God last year.”

But restarting closed refining facilities is not as easy as turning on and off a tap. Some aging facilities were permanently closed after the Covid-19 pandemic dampened demand for fuel. Among the policies to encourage the transition to green energy, oil companies have stepped up their transition to renewable energy and fuels, and these changes are difficult to reverse.

In response to a series of “crimes” proposed by Biden, Exxon Mobil publicly fought back. The company says it has invested more than $50 billion in the U.S. over the past five years, during which time its U.S. oil production has increased by nearly 50 percent. Globally, Exxon has invested twice as much as revenue over the past five years — $118 billion in new oil and gas supplies, compared with $55 billion in net income. “We continued to invest during the downturn, increasing our U.S. light crude refining capacity by about 250,000 bpd — the equivalent of adding a new mid-size refinery. We continued to invest even during the pandemic, when We lost over $20 billion and had to borrow over $30 billion to maintain investment to add capacity and prepare for a post-pandemic demand recovery.”

Mike Sommers, president and CEO of the American Petroleum Institute (API), also “returned” saying that the current capacity and output of U.S. refineries are near five-year highs, but demand still exceeds supply.

“Several factors have contributed to a severe and persistent supply-demand imbalance in the global oil market. As the global economy rebounds from the Covid-19 pandemic, demand for energy, especially crude oil, has surged. This is partly due to geopolitical and market forces in recent years. Global underinvestment, driven by global economic growth, public policy and investor sentiment.” A combination of factors contributed to the worst energy crisis since the 1970s, Sommers said, “It’s time to wake up to energy — the oil and gas industry and governments We need to work together to unleash America’s energy resources, encourage investment opportunities, accelerate infrastructure development, and strengthen global energy security.”

The American Petroleum Institute and American Fuel and Petrochemical Manufacturers (AFPM) also corrected and clarified a number of facts in their letter to Biden, including:

Refined oil prices are determined by the global market. Monthly data from the U.S. Energy Information Administration (EIA) shows that crude oil accounts for 60% of gasoline prices, refining costs 17%, federal and state taxes 12%, and distribution and marketing 11%. Crude oil refined products are globally traded commodities that are priced in a competitive global market. U.S. refineries have been operating at historically high utilization rates, producing about the same product as they have been in the past five years.

U.S. refineries are operating at or near maximum utilization. According to EIA data, U.S. refineries are operating at 94 percent of their capacity — among the highest in the world — and produce more gasoline and diesel than the U.S. needs today. In addition, many facilities have safely postponed projects and/or maintenance so as not to take capacity offline, and instead continue to provide supplies and build inventories.

In addition, about half of U.S. refinery shutdowns were converted to renewable fuel production. Other key U.S. suppliers, including refineries in Canada, are undergoing similar revamps.

U.S. refining is a long-cycle business. Refiners don’t invest billions of dollars based on short-term returns. They look at long-term supply and demand fundamentals and invest as appropriate. “To that end, under your campaign promise to ‘end fossil fuels,’ please consider some of the policy and investment signals various federal agencies and allied governments are sending to the market about our refining industry.”

(This article is from CIC, for more original information, please download the “CIC” APP)

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