Why the Biden Administration In June 2022 Requested More Refineries Instead of Drilling for Oil

In June 2022, the Biden administration issued an extraordinary request to oil companies: to construct more refineries rather than drilling for more oil. This move has sparked debates and questions about why the focus was on refinery expansion instead of oil exploration. The key reasons behind this decision and the implications are explored below.

Refinery Capacity as the Primary Bottleneck

The crux of the matter lies in the capacity of refineries. Refineries play a crucial role in the production and processing of crude oil into the various petroleum products we rely on daily, including gasoline, diesel, and jet fuel. A recent study indicates that refinery capacity has been severely strained, with a significant reduction of nearly 3 million barrels per day worldwide since 2018. In the United States alone, the capacity has dropped by over one million barrels per day. This decline in refinery capacity is evident in the closure of several existing refineries and the sale of many to different corporate owners.

Role of Saudi Aramco and PEMEX

One of the largest refineries in North America, operated by Saudi Aramco, highlights the international significance of refineries. Additionally, the sale of the Deer Park Shell refinery to PEMEX underscores the shifting dynamics in the global oil market. These events demonstrate the complex geopolitical and economic factors influencing refinery operations.

Industry Response and Limitations

Notably, oil companies are more likely to focus on expanding existing refineries rather than constructing new ones. For instance, Exxon’s Baytown refinery is currently undergoing expansion. However, this process is lengthy and faces numerous challenges. Furthermore, the environmental and legal hurdles posed by opposition groups, such as environmentalists supported by Biden Democrats, can greatly delay or prevent new refinery constructions. These barriers make it less likely that oil companies will invest billions in new refinery construction.

Strategic Implications and Broader Debate

The question of whether the administration is serious about expanding refinery capacity remains unresolved. Some argue that the move is a strategic ploy to appease the public without making significant changes. President Biden's approach to supporting Ukraine also bears similarities to this: slowly sending support to avoid immediate confrontations. Critics may see this as a piece of an overall strategy to manage expectations without producing real change.

Some go as far as to accuse President Biden of deception and criminal intent, asserting that his actions are deliberately aimed at maintaining high oil prices. Others argue that the current focus on refinery capacity is a rational response to an existing bottleneck in the energy sector. Regardless of the motive, the Biden administration's decision reflects a broader debate on the best pathways to alleviate energy shortages and lower oil prices.

As the global demand for petroleum products continues to grow, the issue of refinery capacity necessitates urgent attention. Understanding the structural challenges and policy responses is crucial for addressing the complex dynamics of the modern energy market.