Though inflation’s impact is broad, Americans are feeling it perhaps most acutely at gas stations as record prices there make commutes more expensive and cut into vacation budgets.
Gasoline prices have become a politicized issue as a result, hurting President Joe Biden’s approval ratings as the country heads into midterm elections and beyond.
On Wednesday, he called out major oil companies directly for what he said was their role in preventing Americans from getting access to cheaper fuel, saying their gasoline production isn’t where it should be.
“I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office,” wrote Biden in a letter sent to the CEOs of oil companies including Exxon Mobil and Chevronand obtained by Axios. “But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.”
Beyond the persistent lag in oil production caused by the pandemic’s lockdown, Biden also acknowledged the impact that Russia’s invasion of Ukraine has had on the global energy market. “The shortage of refining capacity is a global challenge and a global concern,” he wrote.
However, rather than focus only on those largely external factors in his letter, Biden cited energy company profit margins that have increased in recent months. The last time oil prices neared $120 per barrel was in March, Biden wrote, the same as it is now. But the price of gas was $4.25 per gallon in March, versus $5 today.
“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,” wrote Biden.
Treasury Secretary Janet Yellen, however, has stated that corporate greed is not to blame for high prices. “Demand and supply is largely driving inflation,” said Yellen at an event hosted by the New York Times last week, adding that though it’s true that price-to-cost margins have gone up, they are not driving inflation.
The oil industry trade association, the American Petroleum Institute, said in a statement to the Associated Press that the limited production capacity is partly due to the Biden administration and its push to eliminate fossil fuels to reduce pollution.
“While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” API CEO Mike Sommers said in the statement to the Associated Press.
As a result of persistently high gas prices, Biden wrote that he would use federal powers to increase production, and noted that his administration has already taken significant first steps to do so, like invoking emergency powers to initiate the release of oil from federal reserves, expanding access to gasoline with 15% ethanol (E15), and authorizing the use of the Defense Production Act (DPA) to streamline production.
“I am prepared to use all tools at my disposal, as appropriate, to address barriers to providing Americans affordable, secure energy supply,” he wrote without specifying what those additional tools are.
Biden also said that he has called on Secretary of Energy Jennifer Granholm to convene an emergency meeting to discuss the topic, as well as to engage the National Petroleum Council in those discussions. The National Petroleum Council is an advisory committee that represents matters relating to the oil and natural gas industries.
The letter represents the second time within the span of a week that Biden has aired criticisms of oil company revenues. At the Port of Los Angeles last week, Biden spoke about supply-chain problems that are currently intertwined with high inflation in the U.S.
Following his remarks, he was asked to comment on Exxon’s profits. “Exxon made more money than God this year,” he said.
