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Biden tells oil companies their record profits are ‘unacceptable’

President Joe Biden told US refiners that unprecedented margins were unacceptable and called for “immediate action” to improve capacity as gasoline prices hit record highs, inflation and fears of a recession withdrawal.

“In a time of war, it is unacceptable for higher-than-normal refinery margins to be channeled directly into American homes,” Biden said in a letter to oil companies. top mine on Wednesday.

Biden said his administration was prepared to take any “reasonable and appropriate” steps to help companies increase production going forward, and said he had asked Energy Secretary Jennifer Granholm to organize hold an urgent meeting on this subject in the coming days.

The president added that the federal government would open negotiations with the National Oil and Gas Council – an advisory committee that represents the industry – and called on the companies to provide the Department of Energy with an explanation. why they cut capacity and what can be done to address. gas price now averages more than $5 per gallon nationally.

“We’re seeing huge profit taking on the part of refineries,” Granholm said Wednesday in an interview with CNN. “And so the president is calling for both increased oil production in the United States and around the world, and he is calling for an increase in refinery capacity. And he called them to a meeting to say, ‘What can we do to make that happen?’

But restarting closed refineries is not as easy as flipping a switch. More than 1 million bpd of US refining capacity – about 5% of total capacity – has been shut down since the start of the pandemic. Some older facilities have been permanently closed as the virus destroys fuel demand. Others are being modified for renewable production diesel oil instead of petroleum-based fuels in the context of a web of federal policies promoting the transition to green energy; those transitions may be too far in the opposite direction.

Biden has stepped up his political efforts to tackle soaring oil prices in recent days, as polls show inflation concerns have weighed heavily on both his approval ratings and the outlook for the economy. Democrats’ hopes of maintaining control of Congress in November. The S&P 500 index saw a sharp sell-off earlier this week as investors braced for the possibility of the Federal Reserve The Federal Reserve on Wednesday could signal a higher-than-expected rate hike earlier in an attempt to rein in inflation.

Last week, Biden introduced Exxon Mobil Corp. during an event in the Port of Los Angeles, saying the company “made more money than God last year.” Biden urged the company to “start investing and start paying taxes.”

Biden adviser Brian Deese met with Exxon and Chevron Corp executives. last week about what the administration can do to help increase refinery capacity, according to a White House official.

Meanwhile, Finance Minister Janet Yellen dismissed the notion that corporate greed was driving prices up, saying last week that “supply and demand are largely responsible for inflation”.

The president is also looking to mend relations with Saudi Arabia and Crown Prince Mohammed Bin Salman during his visit next month when he asks OPEC producers to increase output.

Oil industry leaders reacted coldly to Biden’s push. “Any suggestion that U.S. refineries are not doing our part to provide stability to the U.S. refineries,” said Chet Thompson, president of the American Association of Fuel and Petrochemical Manufacturers. market is wrong.

Thompson called the letters a surprise and disappointment, as industry officials have “worked closely with the administration” and made recommendations to address the product crisis as recent as this week. .

Mike Sommers, president of the American Petroleum Institute, pleaded with Biden to take steps to free up US energy production “instead of becoming increasingly dependent on foreign sources.”

“The administration’s misguided policy agenda shifts away from domestic oil and nature Air have increased inflationary pressures and added difficulty to companies’ daily efforts to meet growing energy demand while reducing emissions“Sommers said in an emailed statement.

Companies that received Biden’s letter include Exxon and Chevron, as well as Marathon Petroleum Corp., Valero Energy Corp., Phillips 66, BP Plc and Shell Plc.

In the letter, Biden said that while Russian President Vladimir Putin’s war in Ukraine was largely responsible for the rise in oil prices, high profit margins were exacerbating the pain of war. He said gas prices are 75 cents higher and diesel prices 90 cents higher than last time crude traded around $120 a barrel.

“The lack of refining capacity – and resulting in unprecedented refinery margins – is diminishing the impact of the historic actions my administration has taken to address the price hikes of crude oil.” Vladimir Putin and is driving up the costs for consumers,” Biden said.

However, some refineries are planning to expand and taking other steps to increase production, including delaying maintenance projects that would temporarily carry out some production. offline. For example, Valero canceled a plan to close a crude unit for 30 days at its Memphis, Tennessee refinery to meet demand and achieve high product margins, Bloomberg News reported today. Monday.

Refineries are already operating at near full capacity to produce gasoline and diesel, although output remains short of demand. Market imbalances have sent prices and profits soaring, a big change for the often low-margin refining industry.

And while high prices often attract investment, there is little indication that oil companies will be building new refineries now, amid a long-term shift away from fossil fuels. long payback period, explosive construction costs and permissive challenges.

Even outside of the United States, there have been large cuts in refining capacity since the start of the pandemic — 2.13 million barrels per day outside the United States — exacerbating the price pain. America’s refining allies have emphasized that ChinaThe country’s exports of petroleum products have fallen even as the rate at which refineries operate has slowed.

Domestic industry advocates say daily output at US refineries has reached levels not seen since January 2020, with no other country selling as much crude or supplying as much. for the global market.

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