WASHINGTON — President Biden has chastised some of the biggest oil companies for cashing in on soaring energy prices and “aggravating that pain” for consumers as he increases pressure on them to increase refining capacity. and reduce costs at the pump.
As the average U.S. gas price tops $5 a gallon for the first time, Biden pointed the finger at energy companies in a letter to seven senior executives dated Tuesday. He asked them to explain their decision to limit refining capacity and announced that his administration would hold an “emergency meeting” to discuss ways to stem the crisis.
“In wartime, far above normal refinery profit margins passed directly to American families are not acceptable,” Biden said in the letter. “There is no doubt that Vladimir Putin is primarily responsible for the intense financial pain being suffered by the American people and their families. $ per gallon, historically high refinery profit margins compound this pain.
The letter, which was addressed to the executives of BP, Chevron, Exxon Mobil, Marathon Petroleum, Phillips 66, Shell and Valero Energy, extends the president’s efforts in recent weeks to shift at least some blame to the companies raking in billions in profits. while diverting all responsibility from its administration. Rising gasoline prices contributed to a drop in Mr Biden’s approval ratings ahead of the midterm elections in the fall.
The president argued in the letter that the companies had failed to restore refining capacity they cut earlier in the pandemic, leaving it at its lowest level in more than half a decade. At the same time, he said, there is “an unprecedented disconnect between the price of oil and the price of gas”, noting that the last time the price of crude hit $120 a barrel, in March , the price of gas at the pump was $4.25. But today, gas prices are 75 cents higher.
“This difference – of more than 15% at the pump – is the result of historically high profit margins for refining petroleum into gasoline, diesel and other refined products,” Biden said. “Year-to-date, refining margins for gasoline and diesel refining have tripled and are currently at their highest levels on record.”
House Democrats passed a bill last month empowering Mr. Biden to declare an energy emergency and crack down on companies known to be excessively raising prices, but it appears unlikely to pass the Senate. Republicans have argued that Mr Biden’s energy and climate policies are at least partly responsible for the rise in gas prices, accusing the president of undermining the US energy industry.
Mike Sommers, president of the American Petroleum Institute, countered that the administration shares responsibility for rising energy prices and called for approval of new drilling leases and approval of “infrastructure critical energy sources” such as pipelines.
“Ahead of his trip to the Middle East next month,” Mr. Sommers said in a statement, “we urge the President to prioritize unlocking US energy resources that are the envy of the world instead of greater dependence on foreign sources”.
Energy experts said Mr Biden’s letter was another example of efforts by Democrats and Republicans to blame rising gas prices.
“It’s part of the combative narrative that it’s the refiner’s fault, the oil companies’ fault,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “The Republican narrative is that it’s all Biden’s fault, and it’s not true. But neither is it true that the refiners conspired” to raise prices, he said.
The United States has lost 5.9% of its refining capacity since 2019, as refineries have been reconfigured to produce new products or closed because their expenses exceeded their revenues.
At the end of next year, executives plan to close the LyondellBasell refinery in Houston, for example, as they face $1.5 billion in expenses to meet air quality standards. The company tried to sell the plant, but no one was interested in buying it.
The trend is part of a global shift in oil processing away from North America and Europe towards Asia and the Middle East, according to Turner, Mason & Company, a consulting firm. Texas council. Refiners have closed at least nine plants in the past three years in the United States. Many could no longer be operated profitably and were retrofitted to handle biofuels.
The Covid-19 pandemic, which sapped demand for fuels as the economy slumped, precipitated decisions from executives who argued that a recovery in future sales was questionable as government policies favored more efficient vehicles and electrical.
No new US refinery has been built for decades.
Holly Frontier, Marathon, PBF, Phillips 66 and Shell are among refiners that have closed plants in Wyoming, New Mexico, North Dakota, New Jersey, Pennsylvania and Louisiana. Some refiners, like Shell, have said they are trying to reduce their emissions of greenhouse gases that cause climate change. Others, like PBF, said the operations they were closing were no longer profitable.
At least four other refineries, in Montana, Oklahoma, Alabama and California, are expected to downsize and switch from conventional fuels to renewable diesel.
As it tries to lower oil prices, the Biden administration could ease regulations allowing the reopening of an accident-prone refinery in St. Croix, Virgin Islands, which has a blemished environmental record. Such an action would likely draw strong protests from environmentalists, as the refinery repeatedly released sulfur dioxide into the air and rained a fine mist of oil onto surrounding homes.
Global fuel markets have tightened since Russia’s invasion of Ukraine in February, and refineries are struggling to meet growing demand as much of the world recovers from the worst of the pandemic.
Overall, there has been less than 1% increase in refining capacity worldwide over the past three years. Refining capacity in Europe has shrunk by 5.7%, adding to the continent’s problems as European countries try to wean themselves off Russian energy.
This has opened up opportunities for oil companies in the Middle East, which have increased their refining capacity by nearly 13% over the past three years.