“In the short term, the U.S. government could enact … 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 to Biden
“We need clarity and consistency on policy matters ranging from leases and permits on federal lands, to the ability to permit and build critical infrastructure, to the proper role of regulation that considers both costs and benefits…. Most importantly, we need an honest dialogue on how to best balance energy, economic, and environmental objectives – one that recognizes our industry is a vital sector of the U.S. economy and is essential to our national security.” – Chevron to Biden
It’s cosmetics time again with Biden and energy. Energy Secretary Jennifer Granholm is meeting today with oil executives in the symbolic quest to reduce gasoline and diesel prices. It all about the mid-term election folks; make no mistake, not “savings the climate.”
Where’s Joe? He won’t be at the meeting. A novice DOE figurehead is presiding. Is it during his nap time? Is there a visit with Hunter on Burisma Holdings? What is Joe doing that is so important?
Biden sent a letter to seven industry executives last week that was long on insinuations and short of real reform, as the anti-oil administration tries to square the circle. (“I understand that many factors contributed to the business decisions to reduce refinery capacity,” he write. “But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.”) 
The oil and gas industry has the moral high ground. Biden’s announcement of a 90-day moratorium on the $0.184 per gallon gasoline tax ($0.244 diesel) says: consumers first, climate-policy last.
Now, we need a moratorium on federal obstructionism against oil, natural gas, and coal. Not for sixty days but for the rest of Biden’s term.
Biden Press secretary Karine Jean-Pierre stated: “Our goal is to make sure that we have a sit-down conversation where we come up with solutions, that we work with the CEOs and figure out what else that we can do to move that capacity forward.”
That’s easy. Two letters from ExxonMobil and Chevron have provided the answers, even if Joe is napping.
Exxon Mobil Press Release (June 15, 2022)
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.
Chevron Letter to Biden
Thank you for your letter dated June 14, 2022. As industry leaders, academic experts and numerous policy makers have pointed out, there are no easy fixes nor any short-term answers to the global supply and demand imbalances aggravated by Russia’s invasion of Ukraine. Addressing this situation requires thoughtful action and a willingness to work together, not political rhetoric. I look forward to meeting with Secretary Granholm and am hopeful for a constructive conversation about actions to address both near-term issues and the longer-term stability of energy markets.
In 2021, Chevron produced the highest volume of oil and gas in our 143-year history. In the first quarter of 2022, our U.S. production was 1.2 million barrels per day, up 109,000 barrels per day from the same quarter a year earlier. In the Permian Basin alone, we expect production to approach 750,000 barrels per day by the end of the year, an increase of more than 15 percent from 2021. And Chevron’s U.S. refinery input grew to 915,000 barrels per day on average in the first quarter of this year from 881,000 in the same quarter last year.
In addition to increasing American oil and gas production, Chevron is also investing $10 billion to reduce greenhouse gas emissions and scale new advanced energy technologies, like carbon capture and hydrogen, along with growing our renewable liquid fuels production capacity to 100,000 barrels/day by 2030. America will lead in these critical new industries, creating jobs at home and exporting them to the world to meet energy and climate objectives.
American oil and gas supplies are among the most efficient, responsibly produced, and lowest carbon intensity supplies in the world. At roughly 15 kg of CO2-equivalent per barrel, Chevron’s Permian Basin carbon intensity is some two-thirds lower than the global industry average. U.S. Gulf of Mexico production has carbon intensity just a fraction of the global industry average. Increasing American production will offset barrels produced in other parts of the world that may not support America’s energy security, economic competitiveness, or environmental goals.
I want to be clear that Chevron shares your concerns over the higher prices that Americans are experiencing. And I assure you that Chevron is doing its part to help address these challenges by increasing capital expenditures to $18 billion in 2022, more than 50% higher than last year.
Chevron and its 37,000 employees work every day to help provide the world with the energy it demands and to lift up the lives of billions of people who rely on these supplies. Notwithstanding these efforts, your Administration has largely sought to criticize, and at times vilify, our industry. These actions are not beneficial to meeting the challenges we face and are not what the American people deserve.
While today’s geopolitical situation is contributing to this energy crisis, bringing prices down and increasing supply will require a change in approach. You have called on our industry to increase energy production. We agree. Let’s work together. The U.S. energy sector needs cooperation and support from your Administration for our country to return to a path toward greater energy security, economic prosperity, and environmental protection.
We need clarity and consistency on policy matters ranging from leases and permits on federal lands, to the ability to permit and build critical infrastructure, to the proper role of regulation that considers both costs and benefits. Many of these elements are described in our industry’s recently released 10-point plan. Most importantly, we need an honest dialogue on how to best balance energy, economic, and environmental objectives – one that recognizes our industry is a vital sector of the U.S. economy and is essential to our national security.
We can only meet these challenges by working together. Chevron will engage in this week’s meeting with Secretary Granholm. I encourage you to also send your senior advisors to this meeting, so they too can engage in a robust conversation. Your “whole of government” philosophy in addressing major issues should apply here too, as a comprehensive approach is best to address the energy needs of our nation and of our allies.
The American people rightly expect our country’s leaders and industry to address the challenges they are facing in a serious and resolute manner. We are a willing partner in that endeavor and trust your Administration will be the same.
Michael K. Wirth
Chairman of the Board and Chief Executive Officer
 Biden to Major Refiners
The June 15th letter from President Biden to Darren Woods, head of ExxonMobil, follows.
Dear Mr. Woods:
I am writing to you about the high prices our fellow Americans are paying at the pump, and how we can all play a part in addressing them.
Since the beginning of this year, gasoline prices have increased by more than $1.70 per gallon. ‘Vladimir Putin’s war of aggression, and the bipartisan and global effort to counter it, has disrupted the global supply of oil and driven up the global price.
But the sharp rise in gasoline prices is not driven only by rising oil prices, but by an unprecedented disconnect between the price of oil and the price of gas. The last time the price of crude oil was about $120 per barrel, in March, the price of gas at the pump was $4.25 per gallon. Today, gas prices are 75 cents higher, and diesel prices are 90 cents higher.
That difference — of more than 15% at the pump is the result of the historically high profit margins for refining oil into gasoline, diesel and other refined products. Since the beginning of the year, refiners’ margins for refining gasoline and diesel have tripled, and are currently at their highest levels ever recorded.
To be sure, the shortage of refining capacity is a global challenge and a global concern. ‘Around 3 million barrels a day of global refining capacity have gone offline since the onset of the pandemic, inhibiting our ability to ramp up supply of gasoline, diesel and jet fuel.
I am ‘working with allies and partners and countries around the world to encourage global refinery capacity to come back online. But, in the United States alone, oil refiners significantly reduced their capacity during the pandemic. In the year before I took office, refineries in the United States reduced their capacity by more than 800,000 barrels a day, leaving American refinery companies today at their lowest level of capacity in more than ahalf decade.
I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office. But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.
“There is no question that Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing. 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 and supplying to the United States market, With prices for your product where they are today, you have ample market incentive to take these actions, and I recognize that some of you have already begun
todo so. I also encourage you to continue maintaining and expanding fuel supply safely.
In addition, 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.
Already, I have invoked emergency powers to execute the largest Strategic Petroleum Reserve release in history, expand access to E15 (gasoline with 15% ethanol), and authorize the use of the Defense Production Act to provide reliable inputs into energy production. Iam prepared to use all tools at my disposal, as appropriate, to address barriers to providing Americans affordable, secure energy supply.
“The crunch that families are facing deserves immediate action. Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis and respect the critical equities of energy workers and fence-line communities. I have directed the Secretary of Energy to convene an emergency meeting on this topic and engage the National Petroleum Council in the coming days.
In advance of that, I request that you provide the Secretary with an explanation of any reduction in your refining capacity since 2020 and any concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months — including transportation measures to get refined product to market.
The lack of refining capacity — and resulting unprecedented refinery profit margins are blunting the impact of the historic actions my Administration has taken to address Vladimir Putin’s Price Hike and are driving up costs for consumers. I appreciate your immediate attention to this issue and your efforts to mitigate the economic challenges that Vladimir Putin’s actions have created for American families.
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