The federal government is seeking to get the oil industry to restart idled refineries, Bloomberg has reported, citing an unnamed source.
According to the source, officials, including members of the National Economic Council, have been contacting industry players to inquire about the possibility of restarting refineries previously shut down in the latest attempt to rein in retail fuel prices.
Regular gasoline prices hit a high of $4.60 per gallon yesterday, up from $4.589 per gallon a week ago and $3.035 per gallon a year ago.
Since the start of the pandemic two years ago, refineries with a combined capacity of over 1 million bpd have been shuttered, Bloomberg reported. Globally, some 2.13 million bpd in refining capacity has been shut down since 2020.
In addition to the shutdown of refineries, at least two are set to be converted to biofuel production facilities, further shrinking the refining capacity available in the world’s largest oil consumer.
The refining capacity shortage has emerged as one of the reasons, besides high crude oil prices, for the current fuel price crunch that has sent the Biden administration scrambling for solutions months before the mid-term elections.
Among the steps taken so far were a 50-million-barrel oil release from the strategic petroleum reserve last November and the announcement of another, massive one of 180 million barrels, to take place over six months.
In addition, the Energy Department has reached out to the industry to ask companies to boost oil production. But while production is indeed growing, it is growing much more slowly than it must to offset supply tightness. Exports are growing, too, contributing to domestic supply tightness, especially in middle distillates.
This has prompted fears of shortages due to consistently strong demand as the economy and consumer spending recovered after the pandemic.
By Irina Slav for Oilprice.com
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