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Produce more gas, less profits

President Joe Biden called on Wednesday US oil refineries to produce more gasoline and diesel and say their profits have tripled in a period of War between Russia and Ukraine while Americans grapple with record high prices at the pump.

“The crisis facing families deserves immediate action,” Biden wrote in a draft letter to oil refiners obtained by The Associated Press. “Your companies need to work with my government to propose concrete, short-term solutions to deal with the crisis.”

Gas prices are about average across the country $5 per gallonan economic drain on many Americans and a political threat to the President’s Democratic compatriots the midterm elections. Headline inflation started rising last year as the US economy recovered from the coronavirus pandemic, but has accelerated in recent months as energy and food prices rose after Russia invaded Ukraine in February and the disrupted global commodity markets.

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The government reported on Friday that consumer prices had fallen jumped 8.6% from a year ago, the worst increase in more than 40 years.

The draft letter notes that gas prices averaged $4.25 a gallon when oil last traded near the current price of $120 a barrel in March. That 75-cent difference in average gas prices over a few months reflects both a lack of refining capacity and profits that are “currently at the highest levels on record,” the letter said.

As Biden sees it, refiners are benefiting from the uncertainties caused by “a period of war.” His message that corporate greed contributes to higher prices was controversial among many economists, but the claim may resonate with voters.

Some liberal lawmakers have suggested cracking down on corporate profits in the face of higher inflation. Senator Bernie Sanders, a Vermont independent, in March proposed a 95 percent tax on profits above the pre-pandemic company average.

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The President has slammed what he sees as profiteering amid a global crisis that could potentially plunge Europe and other parts of the world into recession. say after a speech on Friday that ExxonMobil “made more money than God this year.” ExxonMobil responded that it had already notified administration of its planned investments to increase oil production and refining capacity.

“There is no question that (Russian President) Vladimir Putin is primarily responsible for the tremendous financial pain the American people and their families are enduring,” Biden’s draft letter said. “But in the midst of a war that has raised gasoline prices by more than $1.70 a gallon, historically high refinery profit margins are compounding that pain.”

The letter said the government stands ready to “use all reasonable and appropriate tools of the federal government and emergency agencies to increase refining capacity and production in the short term and ensure that every region of this country is adequately supplied.” already released oil from the US strategic reserve and raised ethanol blending standards, although neither action put lasting downward pressure on prices.

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The President sends the letter to Marathon Petroleum, Valero Energy, ExxonMobil, Phillips 66, Chevron, BP and Shell.

He has also headed the Secretary of Energy Jennifer Granholm to call an emergency meeting and consult with the National Petroleum Council, a state energy advisory group.

Biden is asking every company to explain to Granholm any decrease in refining capacity since 2020, when the pandemic began. He also wants the companies to “come up with concrete ideas that would address the immediate issues of inventory, price and refining capacity over the coming months — including transportation measures to get the refined product to market.”

There may be limitations on how much more capacity can be added. The US Energy Information Administration estimates released on Friday that “refining utilization will twice this summer reach a monthly average level of 96%, near the upper limit of what refineries can sustain sustainably.”

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The draft letter notes that about 3 million barrels per day of refining capacity has gone offline worldwide since the pandemic began. In the US, refining capacity fell by more than 800,000 barrels per day in 2020.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission.

https://www.local10.com/news/politics/2022/06/15/biden-tells-oil-refiners-produce-more-gas-fewer-profits/ Produce more gas, less profits

Sarah Y. Kim

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