Daily on Energy: White House takes on fuel retailers

All those party to the manufacturing and sale of finished motor fuels need “to make sure that they’re doing what is possible, their part, in bringing down the costs for the American people,” Press Secretary Karine Jean-Pierre also said yesterday.

Who sells fuel: Fuel retailers range from the “mom-and-pops,” which make up the majority of stations, to big retail chains operating hundreds of stores.

Around 60%, or some 89,300, of the nation’s 148,000 fuel retail stations are run by single-store operators, while the share of stores run by chains that operate 500 or more locations is approximately 31,000, according to data from GasBuddy.

Charting high prices: Jean-Pierre insisted yesterday retailers and others in the fuel supply chain need to keep pace with falling oil prices, saying that crude has fallen 15% but retail gasoline prices have fallen 3%. The White House didn’t respond to questions about its calculations.

Looking at the market on June 14, when the nationwide average retail price posted its most recent record of $5.016 per gallon, West Texas Intermediate was just short of $119 per barrel.

That means, relative to yesterday’s closing price of $99.5, WTI has fallen 16%, while the nationwide average retail price has fallen nearly 5%, based on AAA’s averages.

Explaining the lag: Patrick De Haan, a petroleum analyst with GasBuddy, said the lag in price changes is typical and emphasized that it goes both ways, often to the detriment of fuel stations, which on average purchase fuel every 2-5 days and have been “on the losing side of things” for most of the year because of the run-up in prices and overall volatility in the market.

“The lag time causes some stations, maybe as many as half of them, to lose money because they’re sitting on fuel that they may have just bought but they can’t raise prices because the majority of stations haven’t,” he told Jeremy.

De Haan also suggested that consumers, and those in Washington, are simply more sensitive to note the differential between oil and gasoline when the price of oil is falling than when it is rising — but that the lag is there in both cases.

Rob Underwood, president of Energy Marketers of America, which represents some 60,000 retail fuel stations nationwide, said market conditions are pushing some stations in an already “cutthroat” business to do anything to gain a competitive edge.

“We’re not making any money off of selling gasoline. The store sales — that’s how they can stay in business,” Underwood told Jeremy. “In a time of rising prices, it’s so competitive, and sometimes they’re selling gasoline at a loss just to keep people inside the store.”

The high-price environment is causing further consolidation among retailers because it’s so difficult for small businesses to compete with larger competitors, including grocery chains that sell fuel, Underwood said.

Remember refining: Analysts and others in the industry have blamed high crude oil prices, mixed with a shortfall of petroleum refining capacity and strong demand, as three primary drivers of high fuel prices.

“Refining was not profitable for a long time, and the outlook did not look good. Planes parked on tarmacs, everyone staying closer to home,” De Haan said. “That kind of was fine at the time, but when demand started coming back this year, especially in light of oil prices surging, it caused gas prices to go beyond $5 a gallon.”

Biden publicly recognized the shortage of refining capacity as contributing to higher prices with his letters to large energy companies last month, and the White House contemplated using the Defense Production Act to manufacture more motor fuel, but he criticized them for making big sums of money and said that “margins well above normal being passed directly onto American families are not acceptable” in the face of war.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

EU PARLIAMENT BACKS TAXONOMY RULE FOR NUCLEAR, GAS POWER: The European Parliament on Wednesday backed European Union rules putting a “green” label on nuclear and natural gas investments, a decision that will ease construction of infrastructure for those power sources over the objections of some environmentalists and members of the bloc.

The vote paves the way for the EU proposal to become law and will add gas and nuclear plants to the EU “taxonomy” rulebook from 2023, which seeks to guide spending toward projects in line with the bloc’s climate goals. The action comes as Europe tries to cut its dependence on Russian fossil fuels amid the war in Ukraine and lean on nuclear and natural gas to help bridge a transition to renewable energy.

Slovakian Prime Minister Eduard Heger praised the move as good for energy security and the bloc’s goal of reaching carbon neutrality — that is, adding no more carbon to the atmosphere than is removed by other means — by 2050.

“We’ll remain on the way to climate neutrality by 2050,” he wrote on Twitter.

Still, the effort has prompted intense backlash from some member states, including Austria and Luxembourg, as well as environmental group Greenpeace, which all said Wednesday that they plan to challenge the decision in court.

Shortly after the Wednesday vote, Luxembourgish Energy Minister Claude Turmes said on Twitter that the Luxembourgish government and Austria will follow through with an earlier threat to “press legal charges,” adding that he “deeply regret[s]” the ruling.

The vote paves the way for the EU proposal to become law, and will add gas and nuclear plants to the EU “taxonomy” rulebook from 2023 that seeks to guide spending toward projects in line with the bloc’s climate goals. The news also comes as the EU seeks to cut its dependence on Russian fossil fuels amid the war in Ukraine and lean on nuclear and natural gas to help bridge its transition to renewables.

Slovakian prime minister Eduard Heger praised the move as good for its energy security and the bloc’s goal of reaching carbon neutrality by 2050.

“This will delay a desperately needed real sustainable transition and deepen our dependency on Russian fuels,” climate activist Greta Thunberg wrote on Twitter. “The hypocrisy is striking, but unfortunately not surprising.”

Reminder: The same debate had started to play out in the U.S. late last year with Democrats’ push for a clean electricity standard, but it was cut short when Sen. Joe Manchin nixed the idea of any such a program. The push had exposed a fundamental difference in strategy between Democrats and environmentalists as lawmakers considered whether to rely solely on renewable energy or support other zero- and low-carbon resources, including nuclear and carbon capture.

SHELL PLANS TO BUILD EUROPE’S LARGEST GREEN HYDROGEN PLANT: Meanwhile, Shell has decided to build Europe’s largest green hydrogen plant.

According to a statement from Shell, the Holland Hydrogen I plant, to be built on reclaimed land adjacent to the Port of Rotterdam, will be powered by 200 megawatts of electrolyzers, making it 10 times the size of the largest existing green hydrogen facility in Europe once it opens in 2025.

The company said it plans to produce hydrogen at the plant using electricity generated by a wind farm off the coast of the Netherlands.

“Renewable hydrogen will play a pivotal role in the energy system of the future and this project is an important step in helping hydrogen fulfill that potential,” Anna Mascolo, the executive vice president of Shell’s emerging energy solutions, told Reuters of the effort.

JUDGE VACATES TRUMP CHANGES TO ENDANGERED SPECIES ACT: A federal judge in California vacated Trump-era changes to the Endangered Species Act yesterday, in a win for environmental groups, which said the decision paves the way to reinstate protections for threatened species.

The ruling, issued by U.S. District Judge Jon Tigar of Northern California, an Obama appointee, voids the 2019 changes ordered by the Trump administration, including one that would have restricted the circumstances under which species can be listed as “threatened.”

Under those regulations, the U.S. Fish and Wildlife Service was no longer required to provide the same protections to species listed as “threatened” as those listed as “endangered.”

Those rules also allowed economic factors to be considered in whether species were listed as threatened or endangered.

Conservation groups hailed Tuesday’s decision, which they said Tuesday “threatened to upend decades of clarity and protections for hundreds of species that have benefited from the established policy.”

“The Court spoke for species desperately in need of comprehensive federal protections without compromise,” Kristen Boyles, attorney at Earthjustice, said in a press release.

“Threatened and endangered species do not have the luxury of waiting under rules that do not protect them,” Boyles added.

OPEC SECRETARY GENERAL DIES: The secretary general of OPEC, Mohammad Barkindo, has died, Nigerian authorities said today, just weeks before he was slated to step down as head of the oil cartel at the end of the month. Barkindo, 63, held the OPEC post for six years since 2016, and was described in a statement from the oil cartel as a “much-loved” leader.

His unexpected death came just hours after he met with Nigeria’s president and defended the energy industry amid efforts to fight climate change, according to the Associated Press. “Our industry is now facing huge challenges along multiple fronts and these threaten our investment potential now and in the longer term. To put it bluntly, the oil and gas industry is under siege,” he said at an energy conference in Nigeria hours before his death.

TESLA OVERTAKEN AS NUMBER ONE ELECTRIC VEHICLE MAKER: Chinese automaker BYD has surpassed Tesla as the world’s largest producer of electric vehicles, according to company filings, underscoring Beijing’s growing dominance in the sector.

BYD, which is part-owned by Warren Buffett, sold 641,000 vehicles in the first half of 2022, according to company filings—a more than 300% jump from the same point last year.

The caveat: Not all BYD’s sales, though, were of fully electric vehicles like the ones made by Tesla. Instead, some were plug-in hybrid passenger vehicles, which contain both a large battery and a traditional internal combustion engine. Still, such vehicles are counted under China’s sales rules as “zero emissions” vehicles.

Tesla, which produces only battery-electric cars without an internal combustion engine, reported just 564,000 EV sales in the same period.

Tesla has blamed its lower delivery figures on “ongoing supply chain challenges and factory shutdowns beyond our control.” Read more from Breanne here.

AUSTRIA PLANS TO ORDER INDUSTRY TO SWITCH TO OIL FROM GAS WHERE IT CAN: Austria plans to order industry to switch to oil from natural gas whenever possible, its energy minister said yesterday, as the EU races to up its gas storage before winter begins.

“Power plants and industrial companies will be instructed to upgrade their systems for dual operation to the extent that it is technically and economically feasible. That means that plants can run on natural gas as well as on other energy sources – in most cases it will be crude oil,” Austrian energy minister Leonore Gewessler said at a press conference.

News of the plan comes as Austria seeks to replace its dependence on Russia, which it relies on for roughly 80% of its natural gas supplies. As Reuters notes, Austria’s power plants use relatively little gas in power plants, though gas plays an important role in its industries such as steel, paper, and heating.

The Rundown

Bloomberg Europe’s string of extreme heat waves linked to jet steam

WSJ Audit and consulting firms at odds over who should verify climate data

Euractiv Kyiv calls on EU to ‘positively consider’ green label for gas, nuclear

Associated Press British Virgin Islands reports more than 50 stranded whales

Calendar

THURSDAY | JULY 7 

10:30 a.m. Rystad Energy will host a “Rystad Talks Industry” event focused on the global solar energy supply chain and barriers to growth of the industry.

WEDNESDAY | JULY 13

2:30 p.m. 366 Dirksen The Senate Energy and Natural Resources’ Energy Subcommittee will hold a hearing on pathways to lower energy prices.