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U.S. meets with refiners on high pump prices; no plan yet -sources

Commodities Jun 24, 2022 07:35
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3/3 © Reuters. Cargo shipping containers are seen in a storage yard surrounded by petroleum storage tanks and oil refineries in Carson, California, U.S., March 11, 2022. Picture taken March 11, 2022. Picture taken with a drone. REUTERS/Bing Guan 2/3

By Jarrett Renshaw and Laura Sanicola

WASHINGTON (Reuters) -U.S. Energy Secretary Jennifer Granholm expressed interest in potentially lifting smog-fighting gasoline rules to fight high pump prices and backed off a plan to ban fuel exports during a wide-ranging meeting with refiners, two industry sources said on Thursday.

With tensions high between U.S. President Joe Biden and Big Oil, the two sides entered the meeting with a promise to work together in good faith. They left still far apart on long-term solutions, the industry sources familiar with the talks said. But both the Energy Department and the sources said talks will continue.

Biden, a Democrat, has criticized industry CEOs for reaping huge profits from a fuel supply crunch exacerbated by Russia's invasion of Ukraine. Biden met briefly with state officials to talk about increasing wind energy on Thursday, but he skipped the meeting with refiners.

Granholm struck a conciliatory tone, the sources said, and acknowledged the lack of viable short-term options to combat high prices.

An Energy Department spokesperson said Granholm did not tell refiners the administration was leaning toward any specific actions as a result of the meeting. Granholm "reiterated that (Biden) is prepared to act quickly and decisively, using the tools available to him as appropriate," the department said.

Industry members had hoped to convince the administration not to ban U.S. fuel exports to combat record gas prices. Granholm all but took the option off the table as a short-term solution, the sources said.

The White House had already been mulling lifting summer gasoline restrictions that require refiners and blenders to avoid lower-cost components like butane to prevent smog. Granholm told refiners that the White House will discuss the issue with the U.S. Environmental Protection Agency, the sources said. It was not immediately clear how much it would cut the price of gasoline but analysts say any change would likely be minimal.

The average price of gasoline was $4.94 per gallon on Thursday, according to data from the American Automobile Association, 34 cents more than a month ago, and $1.87 more than a year ago.

Refiners cut capacity during COVID-19 crisis shutdowns, but prices have skyrocketed this year with post-pandemic demand and a global fuel crisis after Western nations sanctioned Russian oil.

Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and other refining giants reported a massive jump in profits at the end of 2021 and the first quarter of this year and have showered shareholders with buybacks and dividends.

The White House has targeted the refining industry's decision to idle about 1 million barrels per day of production capacity since 2020, arguing they should use their bumper profits to restart plants or units and help fill the supply gap that is driving up prices.

Refiners have a "patriotic" duty to help with supply, the White House has said.

The meeting Thursday with seven companies included executives from Exxon Mobil, Chevron, Marathon and Phillips 66 (NYSE:PSX).


Refiners say investing in reopening plants carries significant financial risks. The Biden administration came into office vowing to shift the country away from fossil fuels that contribute to climate change and has secured billions of dollars for the electric vehicle industry.

Gretchen Watkins, Shell (LON:RDSa) Plc's president of U.S. operations who attended the meeting, said Granholm acknowledged that Shell and other companies, "have diminished refining capacity because we’re busy converting century-old assets to produce biofuels."

Meeting participants discussed technical, economic, and policy hurdles to increasing domestic refining capacity and what the companies are doing to keep existing operations safely online, the Energy Department said. They also talked about actions that could increase preparedness on the Eastern seaboard as the country moves deeper into the Atlantic hurricane season, it said.

On Wednesday, Biden called on Congress to pass a three-month suspension of the federal gasoline tax. Lawmakers within his own party opposed that, saying it may provide little relief while blowing a hole in a Highway Trust Fund budget that the tax funds.

A group of 25 drilling and pipeline industry groups including the American Petroleum Institute sent a letter to Biden on Thursday urging him to visit America's vast energy sources ahead of a July trip to Saudi Arabia, where he is expected to encourage the oil-rich country to boost output.

"American-made energy solutions are beneath our feet, and we urge you to reconsider the immense potential of U.S. oil and natural gas resources – that are the envy of the world – to benefit American families, the U.S. economy and our national security," they wrote.

U.S. meets with refiners on high pump prices; no plan yet -sources

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