Biden Accuses US Oil Refiners of Profiteering from Russia-Ukraine War
…………Urges them To Raise Gas and Diesel Production to Tackle Prices
The US President, Joe Biden has ordered US oil refiners to produce more gasoline and diesel, accusing them of recording tripling profits since the Russia-Ukraine hostilities, even as Americans struggle with record high prices at the pump.
In a letter yesterday (Wednesday) to companies including ExxonMobil, Valero Energy, and Marathon Petroleum, seen by Reuters, Biden told the oil production companies to produce more gasoline and lower gasoline bills for American consumers.
“The crunch that families are facing deserves immediate action,” the President said in the letter. “Your companies need to work with my administration to bring forward concrete, near-term solutions that address the crisis.”
The US President wrote, “The lack of refining capacity – and resulting unprecedented refinery profit margins – are blunting the impact of the historic actions my administration has taken to address Vladimir Putin’s price hike and are driving up costs for consumers.”
He also warned the companies that his administration is prepared “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.”
Reports said the President has directed the 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.
The companies are expected to explain to Granholm any drop in refining capacity since 2020, when the pandemic began. Biden 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.”
The US administration has considered that gasoline prices hit $5 per gallon last week, the highest ever, and averaged $5.014/gallon on June 15, compared to the $5.016 all-time high record set just yesterday.
As gasoline prices rise and inflation hit a four-decade high, President Biden is scrambling for solutions to lower the price at the pump ahead of the mid-term elections in November. So the rhetoric against oil companies is intensifying.
At the end of last week, President Biden called out Exxon and other oil companies for making excessive profits, saying that “Exxon made more money than God this year.”
Rallying oil prices, recovering demand post-COVID, and constrained refining capacity are the key reasons for record-high gasoline prices in the U.S. and many other countries.
Crude oil prices are the single biggest factor determining U.S. gasoline prices, accounting for over 53% of the average retail price per gallon. Moreover, in the U.S., some 1 million bpd of refinery capacity has been shut permanently since the start of the pandemic, as refiners have opted to either close money-losing facilities or convert some of them into biofuel production sites.
In the US, operable refinery capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data.
Broader inflation began to rise last year as the US economy recovered from the coronavirus pandemic, but it accelerated in recent months as energy and food prices climbed after Russia invaded Ukraine 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.
As Biden sees it, refineries are capitalizing on the uncertainties caused by “a time of war”. His message is that corporate greed is contributing to higher prices.