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Biden blasts oil refiners for record profits on pain at the pump

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© Reuters. FILE PHOTO: Gas prices over the $6.00 mark are advertised at a 76 Station in Santa Monica, California, U.S., May 26, 2022. REUTERS/Lucy Nicholson

By Trevor Hunnicutt and Jarrett Renshaw

WASHINGTON (Reuters) -U.S. President Joe Biden, under pressure over sky-high gasoline prices, on Wednesday demanded oil refining companies explain why they are not putting more fuel on the market as they reap windfall profits.

Biden wrote to executives from Marathon Petroleum Corp (NYSE:MPC), Valero Energy Corp (NYSE:VLO) and Exxon Mobil Corp (NYSE:XOM), and complained they had cut back on oil refining to pad profits, according to a copy of the letter https://docsend.com/view/qpg3e8a2s3fbxi3a seen by Reuters.

The letter was also sent to Phillips 66 (NYSE:PSX), Chevron Corp (NYSE:CVX), BP (NYSE:BP) and Shell (LON:RDSa), a White House official, who declined to be identified, told Reuters.

“At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Biden wrote, adding the lack of refining was driving up gas prices faster than oil prices.

Biden said the industry’s lack of action is blunting the administration’s attempts to offset the impact of oil-rich Russia’s invasion of Ukraine, such as releases from the U.S. oil reserves and adding more ethanol to gasoline.

Energy companies are enjoying bumper profits since the invasion, which added to a supply squeeze driving crude prices above $100 a barrel. Fuel demand has remained robust despite record-high gasoline prices.

White House spokesperson Karine Jean-Pierre said refiners have a “patriotic duty” to increase supplies and cut consumer costs.

“We are calling on them to do the right thing, to be patriots here,” she told reporters.

U.S. refining capacity peaked in April 2020 at just under 19 million barrels per day (bpd), when prices tanked during the pandemic and refiners shut several unprofitable facilities. As of March, refining capacity was 17.9 million bpd, but there have been other closures announced since then.

U.S. refiners are running at near-peak levels to process fuel – currently at 94% of capacity. They say there is little they can do to quickly satisfy Biden’s demands.

“Our refineries are running full out,” Bruce Niemeyer, corporate vice president of strategy and sustainability at Chevron, said on the sidelines of a Reuters energy transition conference on Tuesday, before the letter was made public.

Shell is “producing at capacity” and looking at options to increase oil and gasoline production, a spokesperson said.

Exxon, the focus of the president’s ire against oil companies last week, has invested to expand its refining capacity by 250,000 bpd, the equivalent of a medium-sized refinery, said spokesman Todd Spitler.

Spitler said the administration in the short term could lift the Jones Act provisions that force domestic shippers to use U.S. flagged vessels that employ union labor, or waive fuel regulations.

The U.S. government has waived summertime bans on the use of cheaper, smog causing fuel components in emergency cases. The administration recently used emergency powers to lift the ban on gasoline with higher blends of ethanol.

Phillips 66, Valero and Marathon Petroleum said they would work with the administration. Chevron and BP did not immediately comment.

HIGH INFLATION

Biden has escalated his rhetoric against oil companies as pump prices have race to record highs above $5 per gallon.

Privately, White House officials have been asking refiners about idled plants and spare capacity and whether there are other ways to increase gasoline supply, according to two sources familiar with the discussions.

Rising gas prices have helped drive unexpectedly persistent consumer price inflation and voter anger before Nov. 8 midterm elections where Biden’s Democratic Party is defending its control of Congress.

Biden has attributed rising oil prices primarily to U.S.-led sanctions that took Russian energy supplies off the global market.

He has also blamed major oil companies riding rising energy prices to record earnings, and giving profits to investors rather than spending on new drilling and refining capacity.

“Exxon made more money than God this year,” Biden said last week, after the major’s first quarter profit doubled from the previous year to $5.48 billion.

Exxon’s Spitler said the top U.S. producer has invested more than $50 billion over the past five years that resulted in a nearly 50% increase in U.S. oil output.

U.S. Energy Secretary Jennifer Granholm plans to host an emergency meeting on how refiners can respond to higher prices, Biden said, asking oil companies to provide “concrete ideas” to increase oil refining and explain why they may have cut such capacity in the last two years.

Stock Markets

Asian Stocks Down as Oil Rises on Tight Supply Concerns

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© Reuters

By Zhang Mengying

Investing.com – Asia Pacific stocks were mostly down on Tuesday morning after Wall Street fell and oil prices rose on tight supply concerns.

Japan’s Nikkei 225 edged up 0.16% by 10:31 PM ET (2:31 AM GMT).

South Korea’s KOSPI fell 0.30%.

In Australia, the ASX 200 rose 0.23%.

Hong Kong’s Hang Seng was down 1.01%

China’s Shanghai Composite was down 0.49% while the Shenzhen Component was down 0.38%. To boost the recovery from COVID-19 disruption, People’s Bank of China Governor Yi Gang vowed to maintain the supportive monetary policy.

The SS&P 500 fell 0.30%, tech-heavy Nasdaq 100 fell 0.81%. U.S. Treasuries yield hovered around 3.19%.

Crude rose past $110 per barrel as supply remained tight over lost Russian supply amid sanctions on Russian oil exports. Adding to the supply concerns, Libya and Ecuador flagged potential output cuts on political unrest.

The Group of Seven (G7) leaders are set to discuss the means to tackle rising energy prices. They are considering a possible price cap on Russian crude and oil product exports at the same time while reducing the damage to economies.

“A seam of tight supply news bolstered the (oil) market,” Commonwealth Bank of Australia (OTC:CMWAY) analysts said in a research note.

“Political unrest might curtail supply from a couple of second-tier producers, Ecuador and Libya. And then there’s the G7’s proposed price cap on Russian oil.”

Earnings revisions are a risk with the US economy set to slow next year, though China emerging from COVID strictures could act as a buffer for the world economy, according to Bloomberg, quoting Lorraine Tan, Morningstar director of equity research.

“You got a US slowdown in 2023 in terms of growth, but you have China hopefully coming out of its lockdowns,” Tan told Bloomberg.

The European Central Bank (ECB) President Christine Lagarde, U.S. Federal Reserve Chair Jerome Powell, the Bank of England Governor Andrew Bailey, and Cleveland Fed President Loretta Mester due to speak at the ECB event this Wednesday.

In Asia-Pacific, China’s purchasing managers index is due on Thursday.

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China Evergrande faces winding-up lawsuit for $110 million deal obligation

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© Reuters. The Evergrande Center of China Evergrande Group is seen amid other buildings in Shanghai, China, September 24, 2021. REUTERS/Aly Song

(Reuters) – China Evergrande Group said on Tuesday a winding-up petition was filed against it by investment holding firm Top Shine Global Ltd in Hong Kong for not fulfilling a financial obligation of HK$862.5 million ($109.91 million).

On Monday, Reuters reported that Top Shine Global, an investor in Evergrande’s unit Fangchebao (FCB), had filed the petition saying the embattled property developer had not obliged to a deal to repurchase shares it bought in FCB.

Top Shine in March last year bought 0.46% of FCB, a Chinese online real estate and automobile marketplace, for HK$750 million.

Evergrande in an exchange filing said it will oppose the petition, adding, it would not impact its offshore debt restructuring plan in works that is slated to be announced before the end of next month.

Filed by Top Shine Global of Intershore Consult (Samoa) Ltd on Friday, it is the first known winding-up petition to have been lodged against the Chinese property developer, which has more than $300 billion in liabilities.

($1 = 7.8472 Hong Kong dollars)

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Heineken to expand Mexico operations with $90 million plant

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© Reuters. FILE PHOTO: Heineken beer bottles are seen at a bar in Monterrey, Mexico June 20, 2017. REUTERS/Daniel Becerril/File Photo

MEXICO CITY (Reuters) – Heineken (OTC:HEINY) will build a 1.8 billion peso, or $90 million, can manufacturing plant in the northern Mexican state of Chihuahua near its brewery in the town of Mequoi, the company said on Monday.

The plant, Heineken’s seventh in the country, will bring around 120 direct jobs after opening and around 150 during the construction phase, it said in a press release.

The beermaker said it had seen increased demand for cans in the country, as other national alcoholic drink producers like Becle, Jose Cuervo’s parent company, say they are struggling to obtain glass to bottle their spirits.

Around 40% of beer in Mexico is currently made in cans, while the rest is made in glass bottles, according to the National Chamber of Beer and Malted Drinks.

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