Guest “Bring it on Brandon!” by David Middleton
Published June 15
Biden threatens oil companies with ’emergency powers’ if they don’t boost supply amid inflation spike
Biden says oil companies are earning ‘historically high’ profits
Biden’s statement blames oil companies for running “historically high profit margins” even as Americans experience surging gas prices. Biden has recently faced criticism for a lack of executive action aimed at curbing inflation.
“There is no question that Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing,” Biden wrote. “But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain.”
“Your companies and others have an opportunity to take immediate actions to increase the supply of gasoline, diesel and other refined product you are producing,” he continued. “My administration is prepared 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.”
Everything this idiot has done since occupying the White House has made it more difficult for oil companies to explore for oil & gas, lease acreage, drill wells and produce, transport and refine petroleum products. And he has the temerity to demand an increase in production?
Rather than writing flatulent letters, maybe he could have checked with the Energy Information Administration (EIA).
JUNE 10, 2022
EIA expects high refinery margins to contribute to increasing fuel production this summer
In our June 2022 Short-Term Energy Outlook (STEO), we forecast that U.S. refinery utilization will be relatively high this summer in response to strong wholesale prices for petroleum products, such as diesel and gasoline, which have increased more than the price of the crude oil used to make them.
The price difference between the price of crude oil and the wholesale price of a refined petroleum product reflects the value of refining crude oil. This difference, known as the crack spread, can indicate refining margins and profitability. Crack spreads for both diesel and gasoline increased in the first several months of 2022.
Gasoline and diesel prices and crack spreads are well above historical averages in response to several factors including:
•Low inventories for both petroleum products in the United States and globally
•Fuel demand increases to near pre-pandemic levels
•Relatively low refinery production of both fuels compared with pre-pandemic levels
•Reduced petroleum product exports from Russia
In response to these high prices, we expect that refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain. We expect refinery utilization to average 96% in June, 94% in July, and 96% in August.
We estimate U.S. refinery inputs will average 16.7 million b/d during the second and third quarters of 2022. This average is lower than the 2019 refinery inputs average of 17.3 million b/d despite high utilization rates because of reductions in refinery capacity since early 2020. U.S. refinery capacity has fallen by almost 1.0 million b/d since early 2020 because several refineries were closed or converted.
We expect wholesale prices for gasoline and diesel will begin decreasing in the third quarter of 2022, as refinery production increases. Despite our forecast price decline, we expect that wholesale fuel prices will remain well above previous years through the summer, based on higher crude oil prices as well as the ongoing impact of low global inventories. Low international inventories are likely to face additional tightness in response to the recently announced European ban on Russia’s energy imports.
Principal contributors: Kevin HackEIA
Back during the Shamdemic, the demand for oil and refined products collapsed. This caused prices to collapse, which caused a deep reduction in production. It also lead to the closure of 6 refineries.
The number of operable refineries in the United States (excluding U.S. territories), which includes both idle and operating refineries was 129 at the beginning of 2021, down from 135 at the beginning of 2020.
In 2019, the 335,000 b/cd Philadelphia Energy Solutions (PES) refinery in Philadelphia, Pennsylvania, experienced a major refinery incident that led to the refinery’s closure. Because the decision to permanently close the facility was still pending as of January 1, 2020, the facility was listed as idle in the 2020 Refinery Capacity Report. As of January 1, 2021, the refinery is considered closed and is not included in the 2021 report.
The additional refinery closures in the 2021 Refinery Capacity Report largely reflect the impact of COVID-19 on the U.S. refining sector (Figure 2). In 2020, the pandemic contributed to a substantial decrease in demand for motor fuels and refined petroleum products, which put downward pressure on refinery margins and made market conditions more challenging for refinery operators. Challenging market conditions, increasing market interest in renewable diesel production, and pre-existing plans to scale down or reconfigure petroleum refineries all contributed to the closing of a handful of refineries in 2020. We removed the following refineries from total U.S. operable capacity following their announced closures:
•The Western Refining refinery in Gallup, New Mexico: 27,000 b/cd
•The Tesoro (Marathon) refinery in Martinez, California: 161,000 b/cd
•The Dakota Prairie refinery in Dickinson, North Dakota: 19,000 b/cd
•The HollyFrontier refinery in Cheyenne, Wyoming: 48,000 b/cd
•The Shell refinery in Convent, Louisiana: 211,146 b/cdEIA
Several refineries were also converted to “renewable” diesel production:
Renewable diesel has been increasingly used to meet California’s Low Carbon Fuel Standard (LCFS), Oregon’s Clean Fuels Program (CFP), and EPA’s RFS. Blender tax credits and government subsidies related to California’s LCFS and, to a lesser degree, Oregon’s CFP have encouraged several former petroleum refineries—such as Marathon’s Martinez, California refinery and Phillips 66’s Rodeo Renewed project in San Francisco, California—to convert their refineries into renewable diesel facilities. These projects, in addition to several others, would nearly triple the current 77,000 barrels per day (b/d) capacity of renewable diesel production by the end of 2023. According to data collected from various trade press sources, the United States will have 67,000 b/d of new renewable diesel capacity online by the end of 2022 and another 72,000 by the end of 2023. These estimates are based on projects that are currently under construction. Construction has not yet begun on some projects that also could come online during this time period, although we assume for our forecasts that these projects will not come online before 2024.EIA
No amount of Brandon-blathering will bring those closed refineries back on line. There hasn’t been a new crude oil refinery built in the US since 1977. However, the EIA forecasts that the high crack spread will cause refinery utilization rate to climb from the current ~91% to ~96% by this summer, resulting in the crack spread dropping back to roughly where it was before the Shamdemic.
Unfortunately for Brandon, this will probably not happen before November.
This just in… ExxonMobil fires back (H/T CTM)
ExxonMobil statement regarding President Biden Letter to Oil Industry
June 15, 2022 02:46 PM Eastern Daylight Time
IRVING, Texas–(BUSINESS WIRE)–ExxonMobil today released the following statement in response to a letter from President Biden.
We have been in regular contact with the administration to update the President and his staff on how ExxonMobil has been investing more than any other company to develop U.S. oil and gas supplies. This includes investments in the U.S. of more than $50 billion over the past five years, resulting in an almost 50% increase in our U.S. production of oil during this period.
Globally, we’ve invested double what we’ve earned over the past five years — $118 billion on new oil and gas supplies compared to net income of $55 billion. This is a reflection of the company’s long-term growth strategy, and our commitment to continuously invest to meet society’s demand for our products.
Specific to refining capacity in the U.S., we’ve been investing through the downturn to increase refining capacity to process U.S. light crude by about 250,000 barrels per day – the equivalent of adding a new medium-sized refinery. We kept investing even during the pandemic, when we lost more than $20 billion and had to borrow more than $30 billion to maintain investment to increase capacity to be ready for post-pandemic demand.
In the short term, the U.S. government could enact measures often used in emergencies following hurricanes or other supply disruptions — such as waivers of Jones Act provisions and some fuel specifications to increase supplies. Longer term, government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines.
ExxonMobil, one of the largest publicly traded international energy and petrochemical companies, creates solutions that improve quality of life and meet society’s evolving needs.
The corporation’s primary businesses – Upstream, Product Solutions and Low Carbon Solutions – provide products that enable modern life, including energy, chemicals, lubricants, and lower-emissions technologies. ExxonMobil holds an industry-leading portfolio of resources, and is one of the largest integrated fuels, lubricants and chemical companies in the world. To learn more, visit exxonmobil.com and the Energy Factor.