(Bloomberg) — There may never be a new refinery built in the US despite surging gasoline prices as policymakers move away from fossil fuels, according to Chevron Corp.
“We haven’t had a refinery built in the United States since the 1970s,” Chief Executive Officer Mike Wirth said in an interview on Bloomberg TV. “My personal view is there will never be another new refinery built in the United States.”
The Biden administration has appealed to OPEC and the US shale producers to pump more crude to help lower gasoline prices this year. But even if oil prices were to fall, the US may not have enough refining capacity to the meet petroleum product demand. Refining margins have exploded to historically high levels in recent weeks amid lower product supplies from Russia and China and surging demand for gasoline and diesel.
And adding refining capacity is not easy, especially in the current environment, Wirth said.
“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.”
US retail gasoline prices averaged $4.76 a gallon today, a record high and up 45% this year, according to AAA. East Coast stockpiles of diesel and gasoline inventories in the New York-region are at their lowest levels for this time of year since the early 1990s, raising the specter of fuel rationing, just as the US enters summer driving season. Even with high prices, Wirth is seeing no signs of consumers pulling back.
“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.”
Chevron couldn’t instantly increase production today even if it wanted to due to the considerable lead times in bringing on oil and gas wells, even in the short-cycle US shale, Wirth said. The 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.”
