Stock, economic and business news for June 15, 2022

Credit…Scott McIntyre for The New York Times

WASHINGTON — President Biden chastised some of the largest oil companies for taking advantage of rising energy prices and “making that pain worse” for consumers, while mounting pressure on them to increase refining capacity and cut costs. at the pump

With the average price of gasoline in the United States topping $5 a gallon for the first time, Biden pointed the finger at energy companies in a letter to seven top executives dated Tuesday. He demanded that they explain his decision to limit refining capacity and announced that his administration will hold an “emergency meeting” to discuss ways to tackle the crisis.

“In wartime, well above normal refinery profit margins passed directly to American families are not acceptable,” Biden said in the letter. “There is no question that Vladimir Putin bears the primary responsibility for the intense financial pain endured by the American people and their families. But in the midst of a war that has pushed gasoline prices above $1.70 a gallon, refiners’ historically high profit margins are making that pain worse.”

The letter, which was addressed to executives from BP, Chevron, Exxon Mobil, Marathon Petroleum, Phillips 66, Shell and Valero Energy, expands on an effort by the president in recent weeks to place at least some of the blame on companies that get thousands of millions in profit. while deflecting any management responsibility from him. Rising gasoline prices have contributed to a drop in Biden’s approval ratings ahead of the fall midterms.

The president argued in the letter that companies had failed to restore refining capacity that they cut earlier in the pandemic, leaving it at its lowest level in more than half a decade. At the same time, he said, there is “an unprecedented disconnect between the price of oil and the price of gas,” noting that the last time the price of crude reached $120 a barrel, in March, the price of gas in the pump was $4.25. But today, gas prices are 75 cents higher.

“That difference, of more than 15 percent at the pump, is the result of historically high profit margins for refining oil into gasoline, diesel and other refined products,” Biden said. “Since the beginning of the year, refinery margins for refining gasoline and diesel have tripled and are currently at their highest levels ever recorded.”

House Democrats passed a bill last month empowering Biden to declare an energy emergency and crack down on companies seen as overpricing, but it seems unlikely to pass the House. Senate. Republicans have argued that Biden’s energy and climate policies are at least partly to blame for rising gasoline prices, accusing the president of undermining the US energy industry.

Mike Sommers, president of the American Petroleum Institute, countered that the administration shared blame for higher energy prices and called for approval of new drilling contracts and approval of “critical energy infrastructure” such as pipelines.

“Ahead of his trip to the Middle East next month,” Sommers said in a statement, “we urge the president to prioritize unlocking America’s energy resources that are the envy of the world over increasing reliance on foreign sources.”

Energy experts said Biden’s letter was another example of efforts by Democrats and Republicans to point the finger at rising gas prices.

“It’s part of the combative narrative that it’s the refinery’s fault, the oil companies’ fault,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “The Republican narrative is that it’s all Biden’s fault, and that’s not true. But it is also not true that the refiners have conspired “to raise prices, he said.

The United States has lost 5.9 percent of its refining capacity since 2019, as refineries were reconfigured to produce new products or closed because their spending exceeded revenue.

By the end of next year, executives plan to close the LyondellBasell refinery in Houston, for example, because it faces $1.5 billion in costs to meet clean air standards. The company tried to sell the plant, but no one was interested in buying it.

The trend is part of a global shift in oil processing, which is moving away from North America and Europe toward Asia and the Middle East, according to Turner, Mason & Company, a Texas-based consultancy. Refineries have idled at least nine plants in the last three years in the United States. Many could no longer operate profitably and were refitted to process biofuels.

The Covid-19 pandemic, which has sapped demand for fuel as the economy has slumped, hastened decisions by executives who argued future sales recovery was questionable as government policies favored electric and more efficient vehicles.

No new US refineries have been built in decades.

Holly Frontier, Marathon, PBF, Phillips 66 and Shell are among the refiners that have closed plants in Wyoming, New Mexico, North Dakota, New Jersey, Pennsylvania and Louisiana. Some refiners, such as Shell, said they were trying to reduce their emissions of greenhouse gases that cause climate change. Others, like PBF, said the operations they were closing were no longer profitable.

At least four more refineries, in Montana, Oklahoma, Alabama and California, are prepared for their reduction and conversion from conventional fuels to renewable diesel.

As it tries to lower oil prices, the Biden administration could loosen permitting regulations to reopen an accident-prone refinery on St. Croix in the Virgin Islands that has a poor environmental record. Such an action would likely spark strong protests from environmentalists, as the refinery repeatedly released sulfur dioxide into the air and blew a fine mist of oil onto surrounding homes.

Global fuel markets have tightened since the Russian invasion of Ukraine in February, and refiners are struggling to keep up with surging demand as much of the world recovers from the worst of the pandemic.

Overall, there has been less than a 1 percent increase in refinery capacity worldwide over the past three years. Refinery capacity in Europe is down 5.7 percent, adding to the continent’s woes as European countries try to move away from Russian energy.

That has opened up opportunities for Middle Eastern oil companies, which have increased refinery capacity by nearly 13 percent in the past three years.

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