ENB Pub Note: If Granholm and the Biden Administration force the U.S. E&P operators to not export oil, you will see prices at the pump over new highs. You can consider it of biblical proportions like “Raining Cats and Dogs,” as they say in Ghost Busters. The administration does not understand how the world’s pricing models work.
America’s allies in Europe are desperate for alternative supplies of fuel amid the Ukraine war, and U.S. producers are happy to provide what they can. So wouldn’t you know the Biden Administration now wants to limit fuel exports.
That’s the message Energy Secretary Jennifer Granholm sent last week in a letter imploring seven major refiners to limit fuel exports. We obtained a copy of the letter, which the Administration didn’t release publicly. Ms. Granholm warns that gasoline inventories on the East Coast are at a near-decade low, and diesel stocks are nearly 50% below the five-year average across the region.
“Given the historic level of U.S. refined product exports, I again urge you to focus in the near term on building inventories in the United States, rather than selling down current stocks and further increasing exports,” she writes.
“It is our hope that companies will proactively address this need,” she adds. “If that is not the case, the Administration will need to consider additional Federal requirements or other emergency measures.” In New Jersey they call that an offer you can’t refuse.
This is a political escalation from President Biden’s June command to refiners to immediately lower gasoline prices. As average gasoline prices nationwide have fallen to $3.88 from about $5 in mid-June, he has been taking a media victory tour. Mr. Biden can thank Americans for driving less, and crude prices have been falling amid a broader selloff in commodities.
Yet fuel storage levels are running low heading into hurricane season when it’s not unusual for Gulf Coast refineries to be damaged or shut down. The Administration fears a refinery outage that causes fuel prices to spike in the runup to the November election. Hence, Ms. Granholm’s threatening letter.
But the problem isn’t U.S. exports. It’s the political and regulatory assault on U.S. production and refining. One culprit is the 2019 closure of the Philadelphia Energy Solutions refinery, which removed about 335,000 barrels a day of refining capacity from the Northeast. This made the region more dependent on Gulf Coast and overseas refineries.
Fuel storage levels would be much higher in the Northeast if not for New York state’s natural gas pipeline blockade, which has made the region more dependent on oil for energy. One-third of New England residents still use oil to heat their homes, and New York this month is generating more electricity from oil than from solar or wind.
The Granholm export threat is also a slap in the face to European allies trying to diversify energy sources from Russia. Fuel supplies are tight globally amid sanctions on Russia, which had accounted for 40% of Europe’s oil imports. Europe has had to look elsewhere for diesel fuel, which some manufacturers and power generators are turning to as a substitute for natural gas. U.S. refiners have recently been exporting more fuel to Europe, but Ms. Granholm is now telling them to stop.
Restricting fuel exports is one more counterproductive Biden policy on fossil fuels that would merely drive up global fuel prices, including U.S. imports. Ms. Granholm’s bullying of energy companies shows how little she understands about energy markets.
