President Joe Biden on Wednesday called on U.S. oil refining companies to produce more, saying they need to help alleviate the burden of high prices on consumers. “At a time of war – historically high refinery profit margins being passed directly onto American families are not acceptable,” the president said in a letter to oil companies including Exxon Mobil and Chevron. ″[C]ompanies must take immediate actions to increase the supply of gasoline, diesel, and other refined product,” the letter added. Biden’s call comes as sky-high energy costs add to inflationary concerns across the economy. The national average for a gallon of gas crossed $5 over the weekend for the first time on record, according to AAA.
The national average now stands at $5.014, which is 54 cents more than a month ago, and $1.94 more than last year. Refiners can’t just ramp up output, with utilization rates already above 90%. Additionally, some refiners are now being reconfigured to make alternate products like biofuel. Refining capacity has dropped since the pandemic took hold, which is a factor in the rapid advance of fuel prices. Demand has returned as economies restart and people travel once again, but supply remains tight.
Still, there is no easy solution. John Kilduff, partner at Again Capital, said refiners are working at historically high level. “There is nothing left to ramp up,” he said. Kilduff noted that no new refineries have been built in decades, but existing units have been expanded. Prior to the pandemic, there had been excess refining capacity, which pressured profits. “Years of sanctions on Venezuela and Iran, and now Russia, has more than contributed to the current situation,” he said. The industry says the administration’s policies are to blame for the surge in prices. “While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas have compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” Mike Sommers, president and CEO of the American Petroleum Institute, said Wednesday.
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