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President Biden puts pressure on oil companies to produce more gas, fewer profits

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Yahoo Finance columnist Rick Newman breaks down how President Biden is addressing rising gas prices in the U.S. through appealing to oil companies and tapping alternative resources.

Video Transcript

DAVE BRIGGS: President Biden pointing the finger at energy giants, as the average gas in the United States has topped 5 bucks a gallon for the first time ever. In a letter to seven major oil corporations, Biden demanding explanations on their high refinery profit margins. For more on this, let's bring in Yahoo Finance's Rick Newman. Rick, is this a serious policy prescription? Or is this simply aimed at midterm voters?

RICK NEWMAN: Maybe it's in between, Dave. Up till now, it has seemed like Biden is complaining about the oil companies making too much money. And the oil companies are complaining about Biden bashing them. And they're all talking to a microphone, but they're not talking to each other. So now, at least, there's an exchange of ideas, I guess, you could call it.

So Biden sent these letters to seven big oil firms. And these are refiners. These are not necessarily drill-- they are drillers, but he's targeting refiners. And he said, you know, what's the deal? Your profit margins have tripled. They're at record levels. I know you guys have had some economic difficulties in the past. That's a reference to 2020, the COVID shutdowns, when some of these companies just lost tons of money. I mean, they lost billions and billions of dollars in 2020.

And he's basically said-- he kind of asked nice, could you guys please produce more oil? But this-- and his letter also says, my administration is prepared to use all reasonable, appropriate federal government tools and emergency authorities to increase capacity, and so on. So I don't know. Is that a veiled threat? Maybe.

And then Exxon actually put out a response to this just a short while ago, saying, look, we have been increasing refining capacity a little bit, as is appropriate. And they said, by the way, if Biden really wants to do something, there are some emergency procedures he could do. And they named a couple of specific ones that would make shipping easier and make it a little bit easier to move fuels around among refineries. So they're kind of throwing ideas at each other at this point. I would not call this quite a negotiation. But at least, something's happening.

RACHELLE AKUFFO: I mean, we did see the American Petroleum Institute responding, saying, look, the president really needs to prioritize unlocking US energy resources. So between the back and forth, whether it's the president trying to sort of appease voters and oil refiners saying, look, this isn't on us, where does the actual solution lie for this for the American consumer?

RICK NEWMAN: Here's the problem. So for Biden to do anything that would actually make a difference, he would have to backtrack on some of his green energy pledges. And that would infuriate progressives in the liberal wing of the Democratic Party. I'll give you just one example. So at least half of those 10 bullet points in the American Petroleum Institute's wishlist are things that would basically undo things-- Biden's green energy plan.

So one example is the SEC forcing all this carbon emission disclosure for any firm. Not just in oil and gas, but for any firm. The API says, why don't you get rid of that rule? And that would be a powerful signal to Wall Street that you actually stand behind the oil and gas industry. You're not going to basically try to sabotage the industry once oil prices-- oil and gasoline prices go down.

So the problem is, I just don't think Biden is going to change his climate priorities. And Biden, for his part, the problem he faces, the corner he's in, is that he's trying to get oil prices down without doing the things that would actually make a difference, because that would be a major reversal of his total energy platform.

RACHELLE AKUFFO: It's a tough balancing act. It doesn't seem like he's going to win it. A big thank you, as always, to our very own Rick Newman.