US gas prices at the pump have never been higher than they are right now, despite crude prices being below previous highs (albet increasingly rapidly despite Biden's SPR release plan)…
In fact, refining margins (as indicated by the so-called 3-2-1 crack spread) have exploded to historically high levels in recent weeks…
…amid lower product supplies from Russia and China and surging demand for gasoline and diesel (driving the barrel equivalent prices for jet fuel, gasoline, and diesel notably higher than crude)…
However, to take advantage of this is not easy, as Chevron CEO Mike Wirth noted in an interview with Bloomberg TV, adding refining capacity is not easy, especially in the current environment:
“You’re looking at committing capital 10 years out, that will need decades to offer a return for shareholders, in a policy environment where governments around the world are saying: we don’t want these products,” he said.
“We’re receiving mixed signals in these policy discussions.”
The Biden administration is at once demanding US producers pump more to help lower gasoline prices at the pump, and at the same time are blasting US refiners and producers for "gouging" and looking at punishing them with a "windfall tax."
“We’re still seeing real strength in demand” despite international air travel and Chinese consumption not yet back to their pre-pandemic levels, Wirth said.
“Demand in our industry tends to move faster than supply in both directions. We saw that in 2020 and we’re seeing that today.”
In fact, “we haven’t had a refinery built in the United States since the 1970s,” Wirth exclaimed, and given the state of policies around the world towards fossil fuels:
“My personal view is there will never be another new refinery built in the United States.”
The Chevron CEO went on to explain that:
"Capacity is added by de-bottlenecking existing units by investing in existing refineries. But what we’ve seen over the last two years are shutdowns. We’ve seen refineries closed. We’ve seen units come down."
"We’ve seen refineries being repurposed to become bio refineries. And we live in a world where the policy, the stated policy of the U.S. government is to reduce demand for the products that refiners produce," he continued.
All the while, President Joe Biden continues to search for "elusive" answers as to why the price of oil simply won't come down…
"At every level of the system, the policy of our government is to reduce demand, and so it’s very hard in a business where investments have a payout period of a decade or more. And the stated policy of the government for a long time has been to reduce demand for your products," Wirth noted very frankly.
"We raised our Permian [Basin] production growth outlook to 15% this year. So the narrative you hear that the industry is not growing production is not true. We are growing production and our industry is growing production."
Finally, Bloomberg reports that the 'Big Oil' CEO expects to meet with the Biden administration when he’s in Washington next week.
“We need to sit down and have an honest conversation, a pragmatic and balanced conversation about the relationship between energy and economic prosperity, national security, and environmental protection,” Wirth said.
“We need to recognize that all of those matter.”
Watch the full interview below: