RBN Energy

As the price of gasoline continues its seemingly never-ending upward path in the U.S. (not withstanding a bit of a pause in the past week), the cause (or blame, if you prefer) continues to shift. Of course, the Biden administration has heavily promoted the phrase “Putin’s price hike,” and the Russian president can certainly claim some of the blame. His invasion of Ukraine and the subsequent sanctions on the world’s second-largest exporter of refined products (after the U.S.) have led to the loss of several hundred thousand barrels per day of product supply. However, prices for refined products were already rising before his late February invasion due to a variety of other factors, both on the supply and demand sides of the equation. Perhaps the most important factor has been the loss of significant U.S. refining capacity over the last few years, which is limiting the ability of refiners to respond to the strong demand recovery and loss of supply. In its highly publicized June 15 letter to U.S. oil executives, the administration acknowledged this as it demanded refiners reactivate lost capacity and increase production. In today’s RBN blog, we summarize the shutdowns which have taken place in the U.S. and discuss the reasons behind those closures.

In film and television, the “boxed crook” trope is where a condemned person is sought as a last-ditch effort to pull off some impossible mission or overcome a formidable opponent. In return, the convict is typically offered amnesty or other consideration by the operatives in charge. Millennials will probably think of the recent Suicide Squad movies. For Generation X, The Rock starring Sean Connery was a great example. And for the boomers, it was The Dirty Dozen. Our current situation in the U.S. energy sector may not be quite as thrilling as those movies but the same plot elements exist. In today’s RBN blog, we discuss the predicament faced by industry and political leaders and begin to sort out the various proposals to put a lid on prices and restore energy security.

In the next few days, U.S. Energy Secretary Jennifer Granholm will hold an emergency meeting with leading energy executives to discuss steps E&Ps and refiners could take to increase crude oil production, refinery capacity and the production of gasoline, diesel and jet fuel, all with the aim of reducing prices. The prelude to the get-together was less than ideal, though. In a June 14 letter to the top brass of four integrated oil and gas giants and three large refiners, President Biden criticized them for “historically high refinery profit margins” and for shutting down refining capacity before and then during the pandemic. In addition to rejoinders from the companies, the American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM) defended their actions, discussed the complexity of refined products markets, and asserted that the Biden administration’s statements and policies have actually discouraged investment in refining and oil and gas production. Is there a middle ground here? In today’s RBN blog, we look at the high-level correspondence and discuss how at least some compromises might be possible.

For several years now, no single topic has caused more angst in refiners’ quarterly earnings calls than the seemingly arcane topic of renewable identification numbers, or RINs, which can have a big impact on a refiner’s financial performance. RINs are a feature of the federal Renewable Fuel Standard (RFS), which requires renewable fuels like ethanol and bio-based diesel to be blended into fuels sold in the U.S. And depending on your point of view — farmer, refiner, blender, consumer, politician — you may have a very different perspective regarding RINs’ role as a tax and a subsidy. In today’s RBN blog, we dig into the fundamental aspects of RINs at the root of this long-running controversy and examine the role of RINs as a mechanism for forcing renewables into fuels.