Biden tells oil refiners: Produce more gas, fewer profits

On Wednesday, President Joe Biden urged U.S. oil refining companies to produce more gasoline. This was despite the fact that profits have tripled in times of war between Russia & Ukraine and Americans struggling with record-high fuel prices.

Biden wrote that the crunch facing families requires immediate action in a draft of a letter to oil refining companies, which was obtained by The Associated Press. “Your companies should work with my Administration in order to present concrete, short-term solutions to address the crisis.”

Gas prices are at an average of $5 per gallon in the United States, which is an economic burden for many Americans. It also poses a political threat to the president’s fellow Democrats heading into the midterm elections. Inflation was higher last year after the U.S. economy recovered following the coronavirus pandemic. However, it increased in recent months as energy prices and food prices rose after Russia invaded Ukraine in Feb. This disrupted global commodity markets and led to a wider rise in inflation.

Friday’s government report showed that consumer prices rose 8.6% from one year ago. This is the largest increase in over 40 years.

Draft letter notes that gas prices averaged $4.25 a gallon in March when oil was at $120/barrel in March. The 75-cent difference between average gas prices over a short period of time reflects both a shortage in refinery capacity and profits that are “at their highest ever recorded levels.”

Biden believes that refineries are profiting from the uncertainty caused by “a period of war.” While his claim that corporate greed is driving up higher prices has been criticized by economists, the claim may be resonant with voters.

Some liberal lawmakers propose to crack down on corporate profits amid higher inflation. Senator Bernie Sanders, a Vermont Independent, proposed in March a 95% tax to be applied to profits that exceed the pre-pandemic levels of companies.

After a Friday speech, the president harshly criticised ExxonMobil’s profiteering in a global crisis that could push Europe and other regions into recession. He said that ExxonMobil had “made more money this year than God” ExxonMobil replied by saying that it had already informed the administration about its planned investments to increase oil production.

Biden’s draft letter states that “there is no doubt that (Russian President Vladimir Putin) is principally responsible” for the financial distress the American people and their families are experiencing. “But in a war that has raised gasoline prices by more that $1.70 per gallon,” Biden’s draft letter states, “But amid that war, historically high margins at refineries are worsening this pain.”

The letter stated that the administration is ready and able to use any Federal Government tools or emergency authorities to increase refinery production and capacity in the near future, and to ensure that all regions of the country are adequately supplied. It mentions that Biden has already released oil out of the U.S. strategic reserves and increased ethanol blend standards, but these actions did not put any lasting downward pressure on price.

The president has sent the letter to Marathon Petroleum (Valero Energy), ExxonMobil and Phillips 66.

He also directed Jennifer Granholm, Energy Secretary, to convene an emergency meeting with the National Petroleum Council. This federal advisory group is made up of representatives from the energy sector.

Biden has asked each company to tell Granholm about any reduction in refining capacities since 2020, when this pandemic began. He wants companies to offer “any concrete ideas” to address immediate inventory, price, refining capacity, and transportation issues in the months ahead.

There are limits to the amount of capacity that can be added. Friday’s estimates by the U.S. Energy Information Administration showed that refinery utilization will rise to 96% twice a month this summer, close to the maximum level that refiners can maintain.

Draft letter states that around 3 million barrels per day of global refining capacity have been shut down since the pandemic. Refining capacity decreased by more 800,000 barrels per day in the U.S. in 2020.