President Joe Biden's administration on Wednesday released a letter it addressed to seven oil and gas companies, urging them to take steps to lower the cost of fuel as the price of a gallon of on-highway diesel crosses $6 in many regions across the country.
Biden was sharply critical of the companies' "historically high profit margins for refining oil into gasoline, diesel and other refined products" while average consumers suffer, but also seemed to acknowledge that problems with the country's refinery capacity went beyond mere corporate greed.
"Since the beginning of the year, refiners’ margins for refining gasoline and diesel have tripled, and are currently at their highest levels ever recorded," according to the letter. But in the very next line, Biden put the historic squeeze into context, calling refinery capacity a global concern and noting that during the pandemic, about 3 million barrels per day of capacity went offline. Previous reporting from this publication has revealed that a variety of factors have hit refinery capacity. Those include weather events, labor shortages, incidents like a 2019 fire at a major refinery, and a lack of capital expenditures on increased oil capacity, due to a shaky political and business climate around fossil fuels.
"I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office," Biden wrote. "But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable."
Biden added his administration "is prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied." He mentioned ongoing efforts to release oil from the Strategic Petroleum Reserve and expanding access to E15 (gasoline with 15% ethanol).
On Tuesday, the American Petroleum Institute, which represents the oil and gas industry, issued a letter of its own.
The API agreed with the administration that Russia's invasion of Ukraine had caused price increases and instability, and supported the administration's efforts to sanction Russia. But API also pointed to other factors driving price increases.
"Demand for energy, specifically crude oil, has surged as global economies have rebounded from the early part of the COVID-19 pandemic," API wrote. "In part, supplies have not kept pace due to global underinvestment in recent years driven by geopolitical and market forces, public policies, and investor sentiment."
API offered ten possible solutions to lower fuel prices amid what it called "the most consequential energy crisis since the 1970s," a contention the International Energy Administration has echoed. The API's plan largely revolves around clearing administrative and permitting issues around new drilling and refining, but also calling for the Securities and Exchange Commission to "reconsider its overly burdensome and ineffective climate disclosure proposal," which would require publicly traded businesses to disclose climate data. API's plan also called for a rollback of steel tariffs on U.S. allies, something that Biden's administration has reportedly considered, though experts note its impact on overall inflation would likely be minimal.
On Twitter, API President Mike Sommers called Biden's policy agenda "misguided" and welcomed a dialogue with the administration.
Bill Turenne, Chevron spokesperson, said via email that while the company is committed to keeping fuel affordable, and it understands and shares the "significant concerns" around rising prices, things won't get better overnight.
"Unfortunately, what we have seen since January 2021 are policies that send a message that the Administration aims to impose obstacles to our industry delivering energy resources the world needs," Turenne's email read.
"Fuel prices are impacted by many factors that involve far more than one company or even one country. They are fundamentally a question of global supply and demand. Chevron is doing its part to meet the demand for more oil, planning to increase Permian Basin production by more than 15 percent this year, and our overall U.S. upstream capital investments are up 35% over last year," it continued.
Turenne said the latest EIA data shows U.S. refinery utilization at 94.2%, its highest level since 2019. "All of Chevron’s U.S. refineries are operational and our refinery input grew to 915,000 bpd on average in the first quarter from 881,000 in the same quarter a year before," he said.
Also on Wednesday, the Federal Reserve, which is explicitly tasked with managing inflation, raised interest rates three quarters of a point, its largest single rate move since 1994. But since the spike in oil prices owes mostly to a war and a pandemic, rather than the economy running too hot, the Fed admitted there was little it could do about gas prices.
"All over the world, you are seeing these effects, and we're seeing them here, gas prices at, you know, all-time highs and things like that. That's not something we can do something about," said Fed Chairman Jerome Powell on Wednesday.