The Biden Administration hasn’t given up on the idea of limiting U.S. fuel exports in what the White House claims would ease the pressure on consumers at the pump. The Administration also continues to attack the American oil industry, blaming it for making huge profits instead of passing the savings onto consumers.
Desperate to see lower gasoline prices, the Biden Administration is once again floating the idea of curbing U.S. fuel exports in view of the multi-year low inventories domestically and gasoline prices around $0.60 a gallon higher than at this time last year, although prices are more than $1/gal off their peak in June 2022.
The industry is warning the Administration that putting limits on U.S. fuel exports at a time of a global supply crunch and upended trade flows following the Russian invasion of Ukraine will only make matters worse.
If American exports are reduced, the global fuel supply will tighten even further, raising international crude oil prices. Considering that the price of crude makes up more than 53% of the price of a gallon of gasoline, pump prices would rise again. That’s not even including the possibility of imminent crude price spikes in view of OPEC+ potentially announcing a large production cut this week and the still unknown volumes of Russian crude that could be off the market as soon as December when the EU embargo on seaborne imports of Russian oil enters into force.
Yet, the Biden Administration, while inconsistent in its energy policies, is consistent in attacking the U.S. oil industry and blaming it for the high gasoline prices.
The industry warns that any artificially imposed limits on U.S. fuel exports could lead to potential cost increases, refinery closures, job losses, and productivity declines in America.
Last week, Exxon’s chief executive Darren Woods wrote in a letter to the U.S. Department of Energy reviewed by The Wall Street Journal, “Continuing current Gulf Coast exports is essential to efficiently rebalance markets—particularly with diverted Russian supplies.”
“Reducing global supply by limiting U.S. exports to build region-specific inventory will only aggravate the global supply shortfall,” Exxon’s top executive wrote in the letter.
Referring to low inventories in the United States, Woods wrote in the letter, “Free market incentives remain the most efficient way for the industry to address these problems.”
U.S. Secretary of Energy Jennifer Granholm rebuked Exxon and other companies for “misreading” the moment.
“This week’s letter from a company that made nearly $200M in profit every single day last quarter, misreads the moment we are in. The fact is this: Energy companies are making record profits, with refiners and retailers also posting margins that are well above average — while passing the costs on to consumers,” Granholm said on Friday.
“If companies like ExxonMobil continue to believe that ‘free market incentives remain the most efficient way for the industry to address these problems,’ they need to step up and show results for American consumers and the American economy,” she added.
On the same day, U.S. administration officials once again pressed major refiners to limit exports and focus on rebuilding inventories at home, as they floated the idea of export curbs and a new requirement for U.S. firms to have a minimum level of product inventories within the United States, sources with knowledge of details of the meeting told Bloomberg.
After the meeting, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM) said in a statement, commenting on the current dialogue:
“As the administration refuses to rule out limitations on exports, we shared the significant unintended consequences that would come with such a policy, including potential cost increases, refinery closures, job losses and productivity declines.”
“The administration continues to govern with contradictory energy policies and rhetoric,” API and AFPM said, and concluded, “The focus of this administration should not be on trapping product in the United States or diverting fuel away from retail sales and into storage, but rather, on how to better produce and more affordably move U.S. product within the United States.”
By Tsvetana Paraskova for Oilprice.com
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