Biden calls on oil refiners to produce more, cut profit margins | Business and Economy News

In a letter to company heads, Biden says ‘historically high refinery profit margins’ are hurting US consumers.

United States President Joe Biden has called on oil refiners to produce more petrol and diesel, saying their high profit margins are hurting consumers.

Biden made the appeal in a letter delivered on Wednesday to major refining companies, including Exxon Mobil, Chevron, Shell, and British Petroleum. While he said the Russian invasion of Ukraine is “principally responsible” for the financial burden US residents are facing, “historically high refinery profit margins are worsening that pain”.

“The crunch that families are facing deserves immediate action,” Biden wrote in the letter, which was obtained by The Associated Press news agency and US media. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.”

Petrol prices in the US currently average about $5 a gallon ($1.32 per litre), the highest-ever recorded price, an economic burden for many Americans and a political threat for the president’s fellow Democrats going into the midterm elections.

Broader inflation began to rise last year as the US economy recovered from the coronavirus pandemic, but it accelerated in recent months as energy and food prices climbed after the Russian invasion began on February 24 and disrupted global commodity markets. The government reported on Friday that consumer prices had jumped 8.6 percent from a year ago, the highest increase in more than 40 years.

In the letter, Biden called the issue a “global challenge and global concern”, but described an “unprecedented disconnect” between refining costs and the price consumers pay at the pump.

“Since the beginning of the year, refiners’ margins for refining gasoline and diesel have tripled, and are currently at their highest levels ever recorded,” he said.

Economists have questioned how much corporate greed is contributing to the high prices, which may be attributed to constraints in scaling up capacity to meet current needs following reductions during the pandemic. That imbalance has been further compounded by major consumers, notably the European Union, pivoting away from Russian fossil fuels and increasing demand elsewhere. It remains unclear how much capacity can realistically be added in the short term.

In the letter, Biden said the administration is ready 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 noted the administration has already released oil from the US strategic reserve and increased ethanol blending standards, though neither action put a lasting downward pressure on prices.

He also has directed Energy Secretary Jennifer Granholm to convene an emergency meeting and consult with the National Petroleum Council, a federal advisory group that is drawn from the energy sector.

Biden asked refiners to explain to Granholm any drop in refining capacity since 2020, when the pandemic began. He also wants the companies to provide “any concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months – including transportation measures to get refined product to market”.