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Oil companies are profiting from the scarcity driven by refineries losing capacity

DANIELLE KURTZLEBEN, HOST:

Along with the start of the summer travel season, the nation is seeing the highest gas prices in a decade when adjusted for inflation. President Biden is responding by attacking oil companies for profiting off of fuel scarcity.

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PRESIDENT JOE BIDEN: Exxon made more money than God this year.

KURTZLEBEN: Biden fired off letters to seven oil companies, including ExxonMobil, asking them to produce more. But refiners say that's just not possible. NPR's Brittany Cronin explains.

BRITTANY CRONIN, BYLINE: If you filled up at a gas station recently, my condolences. That was probably painful.

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UNIDENTIFIED REPORTER #1: Gas prices soaring to the highest average ever recorded.

UNIDENTIFIED REPORTER #2: ...As gas prices are at an all-time high.

UNIDENTIFIED REPORTER #3: Record-high gas prices in this country, according to...

CRONIN: Gas prices hit $5 a gallon nationwide for the first time ever a week ago. A key reason why is that refiners are not making enough gasoline.

PATRICK DE HAAN: There's been a tremendous challenge with the refineries being able to meet demand that has resurged as the economy continues to gain momentum post-COVID.

CRONIN: That's Patrick De Haan from GasBuddy, a company that tracks fuel prices. You can think of refiners like an Easy-Bake Oven. On one side, you input your raw material - crude oil that's been pumped out of the ground. And out the other side comes your finished product - gasoline, diesel, jet fuel. But there is a bottleneck at refineries right now for a few reasons. First off, the oil sector got annihilated early in the pandemic. When demand for gasoline dried up, some refiners cut back. Denton Cinquegrana is with the Oil Price Information Service.

DENTON CINQUEGRANA: When you're losing money on doing it, what do you do? You stop making it. And that's when you shut down refineries, which we have seen happen.

CRONIN: The second thing that hurt refiners was actual physical damage. Hurricane Ida took out a refinery in Louisiana. A fire burned down another in Philadelphia. But the third reason is really the most crucial. The country is in the midst of an energy transition championed by none other than the president himself.

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BIDEN: I guarantee you, I guarantee you, we're going to end fossil fuel.

CINQUEGRANA: The Biden administration has made it clear that fossil fuels, you do not have a place on the table going forward.

CRONIN: So Cinquegrana says some refiners have repurposed their facilities. In fact, they're making renewables like biofuel instead of gasoline. As a result, the U.S. has lost a million barrels of refining capacity over the last few years. And Cinquegrana doesn't think the U.S. will ever refine as much oil as it once did.

CINQUEGRANA: I think the refining executives say, well, looks like the writing's on the wall.

CRONIN: The irony is that as refiners are shifting away from fossil fuels, they're making a lot of money. President Biden says it's not acceptable for refiners to be profiting so much when Americans are getting squeezed at the pump. In his letter to refiners this week, he called for the companies to ramp up their refining capacity. But that's unlikely to happen. For one thing, refineries are already running at full capacity. As for the ones idled during the pandemic, that's not a quick fix either. Not only would it take months to bring them back online, it's also a financial investment unlikely to pay off.

CINQUEGRANA: You're talking about a lot of money to get these refineries that are idled up and running. And when I'm being told, five years from now, we hope you don't exist, why should I help you?

CRONIN: And as for investing in new refineries, that's pretty much a nonstarter. Here's Chevron CEO Mike Wirth.

MIKE WIRTH: My personal view is there will never be another refinery built in the United States.

CRONIN: The result is an impasse. If President Biden was hoping the country could refine its way out of high gas prices, that's probably not going to happen. Brittany Cronin, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Brittany Cronin
Brittany Cronin covers cars, energy and the future of mobility for NPR's Business desk.