Christine Romans
'Not acceptable': Biden calls out oil refinery profit margin in letter
02:46 - Source: CNN
Washington CNN  — 

President Joe Biden is calling on major oil refinery companies to take “immediate actions” to ramp up supply, telling them in a new letter that “historically high” profit margins are unacceptable at a time when Americans continue to see soaring prices at the gas pump.

The letter is part of Biden’s effort to shift blame for soaring gas prices, which have become a major political problem, though the reality remains that there is not much he can do about it.

“At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” the President writes in a letter dated Tuesday that was sent to seven companies. “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.”

He adds, “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.”

The President and his team have acknowledged in recent weeks that there is not much he can do to address soaring prices, and the actions he has taken so far, such as a record-breaking release of oil from the country’s strategic reserves, have not worked.

A number of factors have driven the price spike, including increased demand following Covid-19 lockdowns in previous years and the return of commuters into offices. But the White House has mainly tried to turn the focus on Russia’s war in Ukraine, and has accused oil companies of trying to bank massive profits off of Putin’s aggression.

Biden’s letter on Tuesday was sent to seven oil companies: Marathon Petroleum, Valero Energy, ExxonMobil, Phillips 66, Chevron, BP, and Shell. While Biden urged the companies to take “immediate actions to increase the supply of gasoline, diesel, and other refined product,” the President also said the federal government is ready to use additional emergency powers to boost refinery capacity and output.

“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,” he writes. “I am prepared to use all tools at my disposal, as appropriate, to address barriers to providing Americans affordable, secure energy supply.”

Biden writes that he’s directed Energy Secretary Jennifer Granholm to hold an emergency meeting on the issue as well as engage with the National Petroleum Council. Ahead of the meeting, Biden asks the companies to provide Granholm 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 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,” Biden writes.

Granholm told CNN’s John Berman on “New Day” on Wednesday that the administration is considering every option to lower record-high gas prices.

“You have heard talk about a variety of actions Congress could take. The Defense Production Act has been on the table that the President has been using in other contexts. But he wants to hear – the reason why he wrote this letter is because he wants to hear from these refining entities” about high prices, Granholm said, citing “massive profit-taking” by the oil companies.

Biden, she said, is “looking at every tool always,” noting that he is also employing the Strategic Petroleum Reserve.

Granholm would not say whether the White House would support a surtax proposed by Democratic Sen. Ron Wyden of Oregon. Wyden is floating a 21% surtax on the excess profits of oil and gas companies that generate more than $1 billion in revenue, according to a spokesperson for the senator.

“The President is calling both upon production of oil to increase in the United States and around the world and he’s calling upon refinery capacity to increase, and he’s calling them to a meeting to say, ‘What can we do to help make that happen?’” Granholm said.

Citing the current “war footing” amid Russia’s invasion of Ukraine, she called for short-term supply increases.

“We’re asking them to be – in this era when we’re on a war footing, to consider increasing supply both domestically and internationally,” she said, adding that in the longer term, the US is working to move toward clean energy.

Ahead of Biden’s trip to Saudi Arabia next month, Granholm said there is “no promise beforehand” that the Saudis will increase energy production.

The energy industry fears a repeat of 2020, when it overinvested in fracking and refining at a time when demand evaporated. Several US energy companies went bankrupt, and access to Wall Street’s money evaporated.

Despite record gasoline prices and surging oil and natural gas prices, the energy industry has been far more cautious about expanding this time around. It also knows that regulations and consumer demand will force it to invest in cleaner energy projects. Meanwhile, others see an opportunity abroad, where energy prices are higher than in the United States and capacity has been even more constrained as Europe attempts to move beyond Russian oil and gas.

In Washington, progressive Democrats, led by Massachusetts Sen. Elizabeth Warren, have called for a windfall profit tax on energy companies that would help offset the rising cost of fuel for Americans. But with little prospect of that passing Congress, Biden is resorting to demanding action that he is almost certainly aware oil companies will reject.

CNN’s David Goldman and Kate Sullivan contributed to this report.