Biden blasts oil companies over gas prices: Correction

  • Market: Crude oil, Oil products
  • 11/17/21

Corrects WTI close in the fourth paragraph.

US president Joe Biden today criticized oil and gas companies for reaping "significant profits off higher energy prices" as he again asked the Federal Trade Commission (FTC) to investigate if there is any price manipulation in gasoline markets.

"The two largest oil and gas companies in the US, as measured by market capitalization, are on track to nearly double their net income over 2019, the last full year before the pandemic" and are spending the profits on stock buybacks and dividends, Biden wrote in a letter to FTC chairman Lina Khan. "I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct."

The White House asked the FTC, the US government's primary anti-trust regulator, in July to investigate if there was any manipulation in oil and gasoline markets, citing a divergent trend in crude and gasoline prices. To date, the commission's response has been to direct staff to increase oversight of mergers in the energy industry. But Biden said the FTC should act immediately to review "mounting evidence of anti-consumer behavior by oil and gas companies."

Focus on rack-to-retail differences

US retail gasoline prices averaged $3.40/USG in the week ended 15 November, up by 43pc since Biden took office, according to Energy Information Administration (EIA) data. The WTI month-ahead crude futures over the same period increased by 52pc, settling at $80.76/bl yesterday. The rapid rise in prices as demand and economic growth recovered from last year's Covid-19 pandemic lows has given Biden's Republican opponents talking points to criticize what they say is an anti-oil agenda as the White House has unrolled ambitious decarbonization plans.

In addition to blasting Opec+ members, and, now, US oil companies, the White House has also highlighted what it terms an unusual lag between the gasoline wholesale rack and pump prices. "In the last month, the price of unfinished gasoline is down more than 5pc while gas prices at the pump are up 3pc in the same period," Biden's letter said.

US refiners group American Fuel and Petrochemical Manufacturers (AFPM) blamed the administration for "shutting down pipelines and putting future production off limits," as well as the continued enforcement of Renewable Fuel Standard ethanol blending rules.

"Prices are determined by competitive firms operating in an environment of supply and demand," AFPM senior vice president Derrick Morgan said. "The administration is blaming others when it ought to take a sober look at its own energy policy."

In search of a culprit

Today's letter represents a significant shift in framing the issue of rising gasoline prices for the Biden White House, which has until now mostly directed criticism at Opec+ for not adding supply to the market fast enough.

A group of Democratic senators asked Biden last week to consider releasing oil from the Strategic Petroleum Reserve and reimposing a ban on crude exports that was lifted in 2015. The White House has not disclosed its thinking on either proposal, but today's letter suggests that the putative FTC investigation remains its primary focus.

Criticism of oil companies over high gasoline prices is a familiar US political fallback, similar to blaming Opec. US lawmakers during the long run-up in oil prices in the 2000s grilled oil executives at congressional hearings to explain record high profits while consumers were paying more at the pump.

"Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply, we should be encouraging the safe and responsible development of American-made oil and natural gas," industry group American Petroleum Institute senior vice president Frank Macchiarola said in response to Biden's letter.

ExxonMobil and Chevron, the two largest US oil companies by market capitalization, reported profits of $6.75bn and $6.1bn for the third quarter, respectively — up from $3.2bn and $2.6bn in the third quarter of 2019. ExxonMobil plans to resume share buy-backs next year for the first time since 2016, and has raised its dividend for the first time in more than two years. After posting record free cash flow in the third quarter, Chevron plans $750mn in share buy-backs in the fourth quarter.

Most US producers, under pressure from investors, are in no rush to use windfalls from surging oil prices to ramp up output. The EIA expects the 2021 crude output to fall by 1.3pc to 11.1mn b/d before recovering to 11.9mn b/d in 2022 — still below the record high 12.29mn b/d set in 2019, before restrictions related to the Covid-19 pandemic slashed global demand and prompted a pullback in US drilling.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

Rising prices weigh on WAF gasoil imports


02/22/24
News
02/22/24

Rising prices weigh on WAF gasoil imports

London, 22 February (Argus) — Gasoil and diesel imports to west Africa are on track to slide to a 16-month low in February as rising prices weigh on demand. Vortexa data show 728,000t of gasoil and 10ppm diesel arrived in west Africa by sea on 1-21 February, equivalent to 34,700 t/d. This is 15,100 t/d lower than the daily average across the whole of January. Cameroon has not imported any at all so far this month after receiving 2,000 t/d in January. Imports to Ghana, Angola and Senegal are all down on a daily average basis. Market participants say buying interest in Ghana has been constrained by a weaker local currency, which has reduced access to US dollars. Currency depreciation is also affecting purchasing power in Nigeria, although gasoil imports to Nigeria have bucked the regional trend and are running 1,900 t/d higher so far this month than the January daily average. Market participants say traded volumes in the region have been below average this month. Higher prices are a key factor. The price of 10,000-20,000t high-sulphur gasoil cargoes delivered by ship-to-ship transfer at the regional offshore Lome trading hub in Togo were indicated at around $45/t above the front-month Ice gasoil futures contract on 22 February. For comparison, 30,000t cargoes of ultra low-sulphur diesel cif ARA were assessed at a much lower premium of $27.25/t to Ice gasoil on 21 February. Ice gasoil itself has rallied in recent weeks, hitting a more than three-month high of $918.25/t on 9 February as concerns over supply disruption in the Atlantic basin persist in the wake of attacks on commercial shipping by Yemen's Houthi rebels in and around the Red Sea, a key route for getting diesel and gasoil from east of Suez to northwest Europe. Inland shortfalls The drop in seaborne imports to west Africa is squeezing supply to inland countries in the landlocked Sahel region, which increasingly rely on volumes shipped to Togo. Gasoil and diesel imports to Togo have been on a downward trend since September last year and this is likely to continue this month, with only 27,500t arriving on 1-20 February, according to Vortexa. As a result, Togo and landlocked Burkina Faso, which relies entirely on overland deliveries, are currently experiencing a shortage of gasoil, market sources said. Another aggravating factor is landlocked Niger's inability to transport gasoil from its Soraz refinery by land to neighbouring Burkina Faso and Mali because of Islamist security threats along those countries' borders, one market participant said. The refinery has had to readjust run rates as it has built up ample gasoil stocks, the source added. Traders in Niger are exploring opportunities to export gasoil to neighbouring Chad instead. Chad is experiencing a shortage of gasoil after product from the country's 20,000 b/d Ndjamena refinery was sold to the Central African Republic at higher prices than domestic values, with traders taking advantage of the lack of Sudanese exports since the country's sole 100,000 b/d Khartoum refinery was bombed in November . The gasoil undersupply in the Sahel comes as Niger's president Abdourahamane Tiani, who took power in a coup in July last year, met with representatives from Togo, Burkina Faso, Mali and Chad on 17 February to discuss regional energy projects, with a view to reaching greater energy autonomy for the landlocked region. Tiani said in December last year that he wants an increase in domestic refining capacity , after a project to increase jet fuel yields at the Soraz refinery was delayed by July's coup. By George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Ship speeds on Red Sea rerouting to 'erode' GHG cuts


02/22/24
News
02/22/24

Ship speeds on Red Sea rerouting to 'erode' GHG cuts

Edinburgh, 22 February (Argus) — Ships increasing speed as they are forced to sail longer routes to avoid Houthi attacks in the Red Sea could "erode" environmental gains in shipping, the United Nations Conference on Trade and Development (UNCTAD) said today. The shipping sector has for over a decade reduced sailing speeds to cut fuel costs and reduce greenhouse gas (GHG) emissions, UNCTAD said. Speed optimisation is one of the solutions shipowners can consider to improve their rating under the International Maritime Organisation's (IMO) carbon intensity indicator (CII) measures which came into force in January 2023. Container ships' speeds for voyages around the Cape of Good Hope at the southern tip of Africa have increased since the Red Sea disruption started late last year. Container trade flows measured in tonnes account for over half of traffic through the Suez Canal, according to the Suez Canal Authority. Higher speeds are likely being used as a way of adhering to delivery schedules but also to manage fleet capacity, as longer routes mean vessels are employed for a longer period of time. UNCTAD said that these trends could erode environmental gains previously achieved by ships reducing speeds, or slow steaming. The organisation calculated that a ship increasing speed to 16 knots from 14 knots would increase bunker fuel consumption per mile by 31pc. "In this context, longer distances travelled due to rerouting away from the Suez [Canal] and through the Cape of Good Hope imply that greenhouse gas emissions for a round trip from Singapore to northern Europe would rise by over 70pc," it said. Ship tonnage entering the Gulf of Aden declined by over 70pc between the first half of December 2023 and the first half of February 2024, while ships passing the Cape of Good Hope increased by 60pc, UNCTAD noted. The security issues in the Red Sea have also affected insurance costs for shipowners, UNCTAD said. "By early February 2024, some reports indicate [risk] premiums rising to around 0.7pc to 1pc of a vessel's value, from under 0.1pc previously," UNCTAD said, citing a report by ratings agency Moody's. Ships avoiding the Suez Canal, particularly container vessels, also pose a risk to "global supply chains, potentially leading to delayed deliveries, heightened costs and inflation", it said. "The war in Ukraine had already shown the impact of longer distances and freight rates on food prices." UNCTAD estimates that about half of the increase in food prices observed in 2022 resulted from increased transport costs caused by longer distances and higher freight rates. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia’s PIS issues spot Suezmax freight tender


02/22/24
News
02/22/24

Indonesia’s PIS issues spot Suezmax freight tender

Singapore, 22 February (Argus) — Indonesia's Pertamina International Shipping (PIS) has issued a spot Suezmax vessel freight tender to move 1mn bl of crude oil for late-March loading. PIS — a wholly-owned subsidiary of Indonesian state-owned refiner Pertamina — is seeking a vessel loading from Girassol, Angola to two discharge ports in Indonesia's Balongan and Balikpapan, with 21-22 March loading dates. The tender will close at 6pm Singapore time (10am GMT) on 22 February with validity until 7.15pm. The shipment can have a maximum unavoidable transportation loss of up to 0.07pc, according to the tender. Suezmax shipment rates from west Africa towards India have fallen from this year's high. Argus- assessed lumpsum rates for 130,000t shipments from the west Africa region to the east coast of India fell to $4.5mn on 21 February, from $5.7mn on 10 January. Suezmaxes especially are choosing to stay in the Mediterranean and northwest Europe after discharging in Europe instead of going to west Africa or the US Gulf, where high vessel supply and limited activity continue to weigh on rates. By Sean Zhuang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Australia’s Qantas flags higher 2023-24 jet fuel costs


02/22/24
News
02/22/24

Australia’s Qantas flags higher 2023-24 jet fuel costs

Sydney, 22 February (Argus) — Australian airline Qantas Airways still expects to incur a record fuel bill in the 2023-24 fiscal year to 30 June, according to its half-year results. Its fuel costs are expected to be A$5.4bn ($3.54bn) at current fuel prices, inclusive of hedging, with 2023-24 jet fuel consumption, including sustainable aviation fuel, predicted to be 81,000 b/d or 19pc higher than the 68,000 b/d recorded in 2022-23. Qantas group's fuel expenditure in 2022-23 was A$4.6bn. New Airbus A321LR aircraft delivered to its budget subsidiary Jetstar are resulting in a 20pc improvement in fuel burn per seat, Qantas said, contributing to a 12pc unit cost improvement compared with the older A320 aircraft they will replace. The airline said this is helping it reach an interim emissions reduction target of 25pc by 2030 . Qantas ordered a further eight A321XLRs for domestic flights for a total order of 28, with the first aircraft arriving in early 2025. Qantas' domestic group capacity guidance for 2023-24 was left unchanged at 103pc of its pre-Covid-19 pandemic figure. But international capacity guidance, excluding Jetstar Asia, was revised down to 94pc from a previous 95pc. Jetstar Asia capacity will reach 42pc of the pre-Covid figure, Qantas said, up from a previous guidance of 40pc. Qantas' July-December profit after tax was A$869mn, down from A$1bn in the previous corresponding period, while revenue of A$11.1bn was up on the 2022-23 first-half figure of A$9.9bn. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.