Refineries Are the Real Problem

Biden is facing two dilemmas: A world short on oil and a nation short on refineries

- Kevin Crowley and Jennifer A. Dlouhy, with Chunzi Xu and Barbara J. Powell

No US president has been reelected with gasoline prices above $4 a gallon, and the price at the pump is almost $4.70 this summer. It's the single biggest economic threat to Joe Biden's presidency.

Biden's first response was urging OPEC to raise global oil supplies, with some success. He tried to shame US shale drillers, too, for failing to put rigs back to work, with less success. Then administration officials began to confront an arguably bigger and longer-term obstacle to reining in the fuel prices that have sent inflation to the highest level in decades: America's refining complex is in decline.

During the pandemic, plants that distill crude into gasoline, diesel, and jet fuel shut down around the world, and construction of new ones was postponed. The closures were especially acute in the US, where old facilities suffered irreparable damage from breakdowns and hurricanes while others were converted to produce renewable diesel. Over the past three years, the nation's refiners have shut or announced plans to shut about 2 million barrels of capacity a day, wiping out enough gasoline production to fuel an estimated 30 million cars.

In June, as prices at the pump shot past $5 a gallon, Biden officials met with top executives from the nation's largest fuel-making companies. The comments they made, industry insiders say, displayed a woeful-perhaps willful-misunderstanding of the refining business. In one Zoom-based session with a refining executive, White House officials soberly suggested that, with profit margins so large, oil companies should be able to recoup the costs of a new refinery in a year.