(Bloomberg) -- As October drew to a close, the White House saw another potential energy flash point on the horizon.
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Officials swung into action, organizing a series of calls between Energy Secretary Jennifer Granholm and several of the country’s biggest oil refiners to discuss strategies to boost stockpiles.
The tone was cordial, according to people with knowledge of the conversations.
But the very next working day, the oil industry was blindsided.
At a hastily arranged press conference on Oct. 31, President Joe Biden castigated Big Oil for handing “outrageous” profits to shareholders and executives rather than bringing down prices at the pump.
Unless that changed, he warned, oil companies faced more taxes. “Their profits are a windfall of war -- the windfall from the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe,” he said.
It was just the kind of whiplash that has repeatedly sown mistrust and stoked tensions with the fossil fuel industry over the course of the Biden administration, according to multiple interviews with executives and lobbyists involved in oil and gas, who declined to be identified because the meetings and conversations they described were private.
Biden’s team has been at odds with the industry since the 2020 election campaign.
But as global energy prices spiked this year following Russia’s invasion of Ukraine, the White House called on Big Oil to help, only to grow increasingly frustrated that it’s holding back on production while reaping record earnings. “Month after month, these companies have posted record profits that they’ve then used to pad shareholder pockets rather than boost production and lower gas prices,” said White House spokesman Abdullah Hasan. “Month after month, we’ve offered them every opportunity and incentive to change their behavior.” While they were never under any illusions about the president’s green ambitions, oil industry insiders say they’ve become increasingly unhappy with a series of conflicting policy priorities -- for example, moving within a matter of months from a halt on federal leasing for oil drilling to demanding more production -- and unrealistic requests such as spending billions of dollars to rapidly add more refining capacity.
Unwilling to act as fall guys for surging household fuel bills in the run-up to the midterm elections, typically low-profile industry figures are becoming more outspoken.
Last week, the chief executive officers of Exxon Mobil Corp. and Chevron Corp. issued grave warnings about potential windfall taxes.
Marshall McCrea, co-CEO of pipeline operator Energy Transfer LP, said this week that US energy policy is so all over the map that it’s becoming like “a Saturday Night Live skit.” “It’d be funny if it wasn’t so tragically sad,” he added.
For its part the administration says it has approved 9,000 drilling permits, released 180 million barrels of oil from the Strategic Petroleum Reserve and essentially provided a floor under the oil price with a commitment to repurchase crude at a barrel. “If they don’t like the carrots approach, the president has made clear we can use sticks too,” Hasan said. “We will do what we need to do to support American families.” The tensions come at a fraught moment for both the country and the rest of the world.
President Vladimir Putin’s weaponization of Russia’s natural gas has left Europe facing a perilous winter.
OPEC has been unwilling to ease a tight oil market; instead, last month, it defied US wishes by agreeing with Russia to reduce output.
Recent history shows the US can play a vital role in ramping up oil production to ease prices and provide energy security.
After all, the shale revolution added more crude to global markets than the entire production of Iraq and Iran combined from 2012 to 2020, making the US the biggest producer of both oil and gas.
But to repeat that growth spurt again would require the right investor and policy support, as well as balancing increasingly ambitious US climate goals.
So far the signs of that happening aren’t good. “A lot of senior executives are kind of throwing in the towel with this White House,” said Stephen Brown, an energy consultant who formerly served as head of federal affairs for refiner Andeavor. “When we talk to folks inside the administration we hear things that are conciliatory toward establishing a relationship.
And then you turn around and get hit between the eyes with a tweet.” On Jan 20, 2020, his first day in office, Biden revoked a presidential permit for the Keystone XL pipeline, which would have allowed more Canadian crude to flow to Gulf Coast refineries.
Days later, he issued a moratorium on new federal oil and gas leasing (later overturned in court).
Executives in the shale patch were infuriated as some of the best well locations in the Permian Basin are on federal land in New Mexico.
The message was clear: Biden and his progressive caucus would be no friend to the oil industry.