Oil prices drop by more than US$5 as Biden expected to cut US fuel costs

Seven oil companies are to meet US President Joe Biden on Thursday (June 23), they are under pressure to drive down fuel prices as they make record profits. PHOTO: REUTERS

LONDON (REUTERS) - Oil prices dived more than US$5 a barrel on Wednesday (June 22) amid a push by US President Joe Biden to bring down soaring fuel costs, including putting pressure on the country's major energy companies to help ease the pain for drivers during peak summer consumption.

Brent crude futures slumped US$5.10, or 4.5 per cent, to US$109.55 a barrel while US West Texas Intermediate futures were down US$5.37, or 5.9 per cent, at US$104.15 as of 3pm Singapore time.

The contracts earlier hit their lowest levels since May 19 and 12, respectively.

Mr Biden on Wednesday is expected to call for temporarily suspending the 18.4 US cents per gallon federal tax on gasoline, a source said, as the United States, the world’s largest oil consumer, struggles to tackle soaring gasoline prices and inflation.

“The latest in a long line of attempts to temper surging prices at the pumps is having the desired effect. Yet whether this knee-jerk reaction will stand the test of time is by no means guaranteed,” said oil broker PVM Oil Associates’ Stephen Brennock, pointing to an expected summer demand surge.

Mr Biden is expected to make the announcement at 1800 GMT (2am Singapore time). On Thursday, seven oil companies are set to meet the President. They are under pressure from the White House to drive down fuel prices as they make record profits.

Chevron chief executive Michael Wirth said criticising the oil industry was not the way to bring down fuel prices and that the government had to change its approach. Mr Biden replied, commenting on the industry’s easily hurt feelings.

Global supply is still expected to lag demand growth as flagged by trading giant Vitol and Exxon Mobil this week.

The US$2.4 trillion set to be invested in energy this year includes record spending on renewables but falls short of plugging a supply gap and tackling climate change, the International Energy Agency said on Wednesday.

Meanwhile, US oil refining capacity fell in 2021 for the second year in a row, the latest government data showed on Tuesday, as plant shutdowns kept whittling away at their ability to produce gasoline and diesel.


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