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WIRTH V. BIDEN: Chevron Chairman and CEO Mike Wirth is emerging as a foil to President Joe Biden ahead of oil executives’ meeting at the White House tomorrow, where they will engage with the administration about how to address the nation’s shortage of refining capacity.
The 61 year-old Wirth, who is an engineer by trade and has led Chevron since 2018, was one of the seven recipients of letters Biden sent to executives last week criticizing their high refining margins. Chevron yesterday circulated a rebuttal from Wirth, which asked for better cooperation and support from the administration to help increase oil production and called attention to the company’s growth plans.
Chevron plans to increase production in the Permian Basin by more than 15% this year compared to last and is spending $18 billion on capital expenditures in 2022, Wirth said.
“Notwithstanding these efforts, your Administration has largely sought to criticize, and at times vilify, our industry,” Wirth also said, adding that the industry needs “clarity and consistency” on matters like federal oil and gas leasing and building new energy infrastructure.
Biden responds: Biden responded to Wirth’s letter by calling him “mildly sensitive.”
“I didn’t know they’d get their feelings hurt that quickly,” he said of oil executives.
The one-on-one reflects the mutual acrimony and the ongoing back and forth between parties, which has been characterized by price gouging accusations and requests for more spending on production on the Biden administration’s part, and pleas for fewer regulations and a more positive treatment of oil and gas on the industry’s part.
Biden has at times boasted that oil production is rising, while at other times, he and Democrats have expressed frustration that production isn’t rising fast enough to tame prices and accused companies of sitting on capital to keep earnings high.
A number have declined to increase spending on production, citing everything from market uncertainty and volatility to the length of time it would take for new investments to translate into more output.
Biden has started calling out oil majors by name to pressure them to produce more oil, although the one he recently singled out to “start investing,” ExxonMobil, is increasing capex in the Permian by 50% this year and expects production there to rise by 25%.
More on Wirth: Wirth also serves as chairman of the American Petroleum Institute, which sent Biden a 10-point list of policy recommendations last week asking for lighter regulatory burdens and a new five-year offshore leasing program (the Interior Department is shooting for June 30 to propose a program).
He has personally donated to Republican candidates for office, as well as some centrist Democrats, such as Sen. Kyrsten Sinema of Arizona.
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BIDEN BACKS FUEL TAX HOLIDAY: Biden has endorsed a temporary suspension to the federal excise tax on gasoline and diesel as a means of lowering fuel prices and will urge Congress to pass one during a speech this afternoon.
A White House aide described the three-month tax holiday Biden supports as particularly focused on bringing price relief during the summer driving season. The taxes add 18 cents to each gallon of gasoline and 24 cents to diesel.
Biden also wants states to suspend their own fuel taxes in concert. A number of states have already done so, with the length of state-level suspensions ranging from 30 days to through the end of the year, but officials in other states have opposed the tax suspension for its reduction to transportation funding.
In supporting the tax holiday, Biden joins some of his fellow Democrats in the Senate, including Sens. Mark Kelly and Maggie Hassan, who proposed a bill in February to temporarily suspend the federal gas tax. Six other Democrats co-sponsored the bill.
Their proposal differs from Biden’s. It would run through the end of the year and wouldn’t apply to diesel fuel.
Reaction: Support for tax holiday among lawmakers is mixed, including among Democrats, who, like their state-level counterparts, have objected to how it would affect transportation funding.
“Consumers will get no meaningful relief from this, it will just starve our highway trust fund of revenues,” Democratic Rep. Jared Huffman of California told Politico of Biden’s proposal. Huffman said he prefers consumer rebates or vouchers for free public transit instead.
Republican Sen. Kevin Cramer said drivers “want the Trump energy policies back,” not a gas tax holiday.
Still other analysts have said tax holidays can effectively drive demand upward and worsen supply constraints, as they don’t fix underlying problems of oil supply or refining capacity.
BIROL TO EUROPE: KEEP YOUR NUCLEAR PLANTS OPEN: International Energy Agency Director Fatih Birol urged European countries weighing or preparing to shut down nuclear power plants to push the pause button because of Gazprom’s throttling of natural gas.
Countries should postone closures “as long as the safety conditions are there,” Birol told the Financial Times in an interview filled with warnings to the Europeans to prepare for a total shutdown of Russian gas imports.
Birol did not name any countries in particular, but his exhortation would apply most apparently to Germany, which is set to retire its remaining three plants by the end of the year.
The German government began considering keeping the reactors online after the war in Ukraine began but concluded the winding down of the reactors was too advanced.
Vice-Chancellor Robert Habeck also asserted in March that keeping them operating “would help us in this foreign policy situation.”
Emergency plans announced so far rather involve combustion of more coal, as well as directives and incentives to industry to save gas.
OIL FALLS BACK NEAR $100: Crude oil slid further this morning to trade at some of its lowest prices in over a month.
West Texas Intermediate is trading around $102 per barrel, a nearly 16% decrease from its recent peak at $122 per barrel. Brent is trading $108, down 12.5% from the $123 per barrel level where it closed on June 8.
The plunge appears driven in large part by the threat of recession. Many investors fear that the Federal Reserve’s efforts to lower inflation by raising interest rates and slowing spending will tip the country into a downturn. Citigroup economist Nathan Sheets put the odds of a recession at 50% in a note to clients today, adding to a number of high-profile warnings.
JERRY JONES HAS REAPED BILLIONS ON GAS COMPANY: Dallas Cowboys owner Jerry Jones has made billions from investing in natural gas producer Comstock Resources.
Thanks to soaring natural gas prices, the value of his stake has rise from $1.1 billion in 2019 to $2.7 billion, according to the Wall Street Journal.
Jones told the publication he is planning to stay in the natural gas business and expects greater returns in the future: “What we’ve done with natural gas at Comstock,” he said, “the value has left the Cowboys in the rearview mirror.”
The Rundown
Energy Intel Russia persists with rerouting exports
Financial Times German finance minister rejects 2035 combustion engine ban
Calendar
WEDNESDAY | JUNE 22
The American Clean Power Association hosts its Energy Storage Policy Forum. Guests include Sen. Sheldon Whitehouse and Jigar Shah, head of the Department of Energy’s Loan Program Office.
