Exxon CEO Warns Biden Administration Against Limiting Fuel Exports

Exxon Mobil body

is rolling back cuts to US fuel exports urged by the Biden administration in August, arguing that restricting shipments would further squeeze global supplies and raise pump prices at home.

Exxon told the Energy Department this week that the oil industry should not slow fuel shipments in favor of putting more in storage tanks, according to a letter reviewed by The Wall Street Journal. Reduced exports would not fill reservoirs in the Northeast, a region where U.S. officials said oil companies needed to send more supplies, but would instead create a glut on the Gulf Coast that would drive refiners to cut production, according to the letter, which was signed by Exxon Chief Executive Darren Woods.

At issue is whether U.S. fuel exports, which are near record levels, are hurting American consumers, especially in some regions like the East Coast, where inventories are low. Administration officials have argued that exports are contributing to declining US fuel stockpiles, while many energy executives disagree.

“Continuing current Gulf Coast exports is essential to efficiently rebalance markets, especially with diverted Russian supplies,” Mr. Woods. “Reducing global supply by limiting US exports to build region-specific inventories will only exacerbate the global supply shortfall.”

On Friday, after the Journal’s story about Exxon’s letter was published, Energy Secretary Jennifer Granholm said U.S. energy companies must take steps to lower prices and fill low oil inventories. gasoline and diesel. He said energy companies are making record profits and passing costs on to consumers, alluding to Exxon’s record second-quarter profit of $17.9 billion.

“These companies need to focus less on getting every last dollar off the table and more on passing the savings on to their customers,” said Ms. Granholm.

Oil companies have clashed with Democrats this year over supply shortages, record oil prices and industry profits. After campaigning on a promise to reduce the use of fossil fuels, Mr. Biden this year has called on oil companies to increase their fuel-making capacity, get more oil out of the ground and expand exports of liquefied natural gas, or LNG, to ease a crisis. in Europe

Russia’s invasion of Ukraine pushed oil prices to their highest levels in years and has made Europe and other nations increasingly dependent on US fossil fuel exports. In June, when U.S. gasoline prices hit a record $5 a gallon, U.S. exports of crude oil and finished products combined reached 6.75 million barrels a day, the fourth-highest monthly figure the highest on record and the most important month since the beginning of the pandemic at the beginning. 2020, US data show.

In August, Ms Granholm sent a letter to oil companies urging them to cut fuel exports and instead replenish stocks on the East Coast, a region at risk of fuel disruptions, in part , due to its distance from the large refineries of the Gulf Coast. He said that if the companies did not do so, the administration would consider “additional federal requirements or emergency measures,” which many analysts interpreted as a threat to limit exports.

“The most effective way to solve this problem without having to deploy emergency actions is for the industry to prioritize construction inventories during this critical window,” he wrote in his letter. “The data clearly shows that there has not been enough progress in building inventories ahead of peak hurricane season.”

Increased overseas shipments contributed to a surge in the price of gasoline and diesel earlier this summer, oil analysts said at the time.



Ms Granholm has also discussed the export restrictions with industry executives in private talks, according to people familiar with the matter. At a news conference in September, he said the administration was not currently weighing any restrictions.

After a meeting Friday between Ms. Granholm, White House officials and oil executives, the oil industry trade groups American Petroleum Institute and American Fuel & Petrochemical Manufacturers said the administration “refuses to rule out limitations on exports”.

“We shared the significant unintended consequences such a policy would bring, including potential cost increases, refinery closings, job losses and productivity declines,” the groups said.

Earlier this year, domestic inventories of crude and products plunged to their lowest levels since 2015. US refineries have lost nearly 5% of their daily fuel-making capacity since the start of pandemic due to facility shutdowns and conversions to biofuels, while shale drillers maintained oil production. roughly flat from December to June, according to federal data.

The surge in overseas shipments helped further deplete fuel inventories and accounted for the sharp increases in gasoline and diesel prices earlier this year, oil analysts said at the time . Likewise, the increase in LNG exports has also pushed up domestic natural gas prices this year.

Some of the political pressure from high energy prices has eased, for now. Gasoline prices have fallen more than $1.20 a gallon since peaking at about $5 a gallon in June as oil prices have fallen on fears of an economic recession. Gasoline inventories in the US have risen nearly 6% since the beginning of June.

In his letter, Mr. Woods said the East Coast had 59.3 million barrels of total gasoline and ethanol in storage, about 1 percent less than usual for this time of year. Gasoline demand through June, he said, was 9% below the three-year average before the Covid-19 pandemic.


Should the US stop fuel exports? Why or why not? Join the conversation below.

Woods also said pipelines that carry fuel from the Gulf Coast to the East Coast are full. Without waivers from the Jones Act — the law passed a century ago that effectively limits the number of ships allowed to move goods between US ports — Mr. Woods said there aren’t enough ships to move more U.S.-made fuel to the Northeast.

On Wednesday, the Biden administration issued a temporary waiver of the Jones Act, allowing a tanker truck carrying diesel to unload its 300,000-barrel cargo in Puerto Rico.

Exxon primarily sells gasoline to the East Coast market, according to the letter from Mr. Woods. If a supply disruption occurred in the Northeast, the company could move fuel from elsewhere in the Midwest and from refineries in other countries, he said.

“Free market incentives remain the most efficient way for industry to address these issues,” said Mr. Woods.

Write to Collin Eaton at collin.eaton@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *