Morning Chronicle - Biden summons Big Oil to meet on gas prices

Biden has blasted the industry over skyrocketing profits and its reticence to boost capital spending, throwing recent barbs at giants like ExxonMobil and Chevron.

Energy Secretary Jennifer Granholm promised a more conciliatory tack on Wednesday.

"We're going in in good faith" Granholm told a White House briefing. "We're going into this to have an earnest conversation with them.

But the oil industry signaled its own wariness towards Biden, who campaigned on the need for low-carbon solutions and canceled the Keystone Pipeline in his first day in office.

Alluding to Biden's upcoming trip to Saudi Arabia, the American Petroleum Institute and other groups wrote to Biden early Thursday to "invite" the US president to tour domestic sites such as the Marcellus Shale in Pennsylvania.

"American-made energy solutions are beneath our feet, and we urge you to reconsider the immense potential of US oil and natural gas resources –- that are the envy of the world –- to benefit American families, the US economy and our national security," the groups said in a letter Thursday.

- Will use 'all' tools -

Gasoline prices currently stand at $4.94 a gallon, a bit below all-time highs, but up more than 60 percent from the year-ago level and a key factor in the "intense financial pain the American people and their families are bearing," Biden said in June 14 letters to oil giants.

The surge follows Russia's invasion of Ukraine, which exacerbated an already-tight energy supply situation, sending crude oil prices sharply higher.

The rise in prices also reflects the diminished state of refining capacity after the industry mothballed some plants during Covid-19 lockdowns, and did not reopen the facilities amid uncertain long-term growth prospects with the buildup of electric vehicles.

Biden's policy thus far has centered on a huge increase in crude oil from the Strategic Petroleum Reserve.

On Wednesday, the US president proposed a temporary fuel tax break, a measure that received a lukewarm reception on Capitol Hill.

"I am prepared to use all tools at my disposal ... to address barriers to providing Americans affordable, secure energy supply," Biden said in the June 14 letter that called on ExxonMobil, Chevron and other industry players to "provide concrete, near-term solutions that address the crisis."

In response, Chevron Chief Executive Mike Wirth pledged to work with the administration, but faulted Biden comments that "at times vilify" the industry -- drawing a Biden quip that Wirth was being "mildly sensitive."

Energy specialist Andrew Lebow is among those skeptical that the meeting will amount to much.

"I don't think there will be anything substantive coming out of this meeting," said Lebow of the consultancy, Commodity Research Group.

"There is very little refiners can do at this point," he said. "If they could produce more, certainly they would be given that the margins are incredible."

- Short-term solutions? -

On Wednesday, Granholm acknowledged that building new refineries could not be done overnight, but said the administration wanted answers about plants that had been taken off line.

She also saw an opportunity in conferencing on supply chain issues, questioning if there was help that could be provided on a bottleneck.

Kevin Book, head of research at Clearview Energy Partners, said there were areas where government could provide aid, such as facilitating procurement of truck drivers and sand for fracking. Adopting a broadly constructive tone on regulation could also boost investment, he said.

"I think today's meeting itself is unlikely to produce concrete results, but the tone of the meeting could materially impact the process of which it is part," Book told AFP in an email.

"If today ends acrimoniously, the standoff could worsen, and the administration may see more political utility in rhetorical enmity than uncomfortable real-life partnership."

M.Brown--MC-UK