Heated rhetoric from the White House and oil industry prompted an in-person meeting June 23 between US Energy Secretary Jennifer Granholm and top oil executives, with few details being made public beyond assurances from both sides that the conversation was productive and would be ongoing.
The “constructive discussion” focused on “ways to address rising energy costs and create more certainty for global energy markets,” the American Petroleum Institute and American Fuel & Petrochemical Manufacturers said in a joint statement.
They contended that “productive outcomes” from the meeting “should send a positive signal to the market that the US is committed to long-term investment in a strong US refining industry and aligning policies to reflect that commitment.”
The Department of Energy and White House offered a similar assessment of the talks being productive, with neither side detailing any immediate actions or plans for next steps beyond continuing the dialogue to address supply and price challenges.
Crude oil futures fell for a third straight session June 23, dropping to five-week lows as growing recession fears overshadowed tight fundamental outlooks. NYMEX August WTI settled at $104.27/b, down $1.92, and ICE August Brent declined $1.69 to $110.05/b.
Tone unchanged
President Joe Biden has taken a harsh tone toward the oil industry, accusing the industry of lavishing in record profits while American families struggle to keep up with soaring prices at the pump. The industry has shot back that Biden’s policies have hamstrung production and led to refinery closures.
The White House June 23 did not tone down its message for oil companies to increase their refining capacity and output and continued to insinuate that domestic refiners could be doing more to help bring down gasoline prices.
“Crude oil prices have dropped by nearly 15% from two weeks ago, but prices at the pump have barely budged,” White House Press Secretary Karine Jean-Pierre said June 23. “The last time the price of crude oil was $110/b, the price of gas was $4.60/gal. Today, it’s about 35 cents higher. That difference is a result of companies’ record-high profit margins for refining oil.”
She added that refiners are not operating at full capacity and have yet to bring back online capacity that fell during the pandemic even as demand has returned.
“We want them to put their profits back into refining oil so that we can bring prices down,” Jean-Pierre told reporters.
The average price at the pump across the US was $5.01/gal the week ended June 13, up $1.94/gal from a year ago, with consumers on the West Coast paying a much higher $5.87/gal on average, according to the US Energy Information Administration.
Biden has said that his administration stands ready to use every tool and emergency authority at its disposal to increase refinery capacity and output in the near term.
Thus far, nothing the administration has tried has made a significant dent in lowering fuel prices, including an unprecedented 1 million b/d release from the Strategic Petroleum Reserve. And Biden’s most recent play to encourage Congress to waive federal taxes on gasoline and diesel through September has been outwardly met with criticism, including from members of his own party.
Meeting agenda
A readout from the DOE revealed that the secretary stuck to talking points that call on refiners to bring more supply to market and pass along savings to consumers.
Granholm told reporters June 22 that she wanted to hear from oil executives whether there was “a chink in the supply chain that is preventing some refinery from coming back online” or “something that they need or some additional help with identifying a supply chain issue” that could open up additional refining capacity.
The DOE said the meeting homed in on global issues impacting supplies; technical, economic, and policy hurdles to increasing domestic refining capacity; and technology investments that could help.
“They also delved into actions that could increase preparedness on the Eastern seaboard as the country moves deeper into Atlantic hurricane season,” the department said.
Restricting US crude exports emerged yet again in the debate over high prices and tight global supplies. The idea circulated for several months in 2021 before Granholm promised in December that she was done considering it.
But she told reporters June 22 that though a crude export ban was not being proposed at the moment, Biden was “not willing to take tools off the table.”
Four Democratic senators urged Biden in a June 23 letter to consider limiting crude exports “… to preserve petroleum supplies for the US and our allies.”
“We believe the current, severe spike in energy prices—driven by Russia’s invasion of Ukraine, a global pandemic, and oil companies’ refusal to use record profits to significantly increase production—provides justification for the use of this authority,” said the letter signed by Senators Jack Reed of Rhode Island, Tammy Duckworth of Illinois, Tammy Baldwin of Wisconsin and Jeanne Shaheen of New Hampshire.
Jean-Pierre said June 23 that the White House had not made any decisions.
The 2015 lifting of crude export restrictions transformed the US upstream sector and reshaped global markets. Likewise, surging US LNG exports are playing a significant role in the global supply crunch and geopolitics.
For crude markets, cutting off most US exports would “depress WTI prices, bloat domestic inventories, raise international prices, and upset allies,” said Paul Sheldon, chief geopolitical adviser for Platts Analytics.
US crude exports have topped 3 million b/d on a monthly basis since November, averaging 3.3 million b/d January-March, the most recent EIA data showed. The US exported roughly 28% of its domestic crude production in March.
Source: Spglobal.com
