Oil prices tumbled on Wednesday amid a push by U.S. President Joe Biden to cut taxes on fuel to cut costs for drivers amid aggravated relations between the White House and the U.S. oil industry.
Brent crude futures were down $5.02, or 4.4%, at $109.63 a barrel while U.S. West Texas Intermediate (WTI) futures fell $5.17, or 4.7%, to $104.34 per barrel.
Earlier in the session, both contracts had shed over $6 each to hit their lowest levels since May 19 and 12, respectively.
Biden on Wednesday is expected to ask Congress to greenlight a three-month suspension of the 18.4 cents per gallon federal tax on gasoline and call on states to suspend their fuel taxes, a senior administration official said.
Lawmakers of both major parties have expressed resistance to suspending the federal tax.
“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 PVM’s Stephen Brennock, pointing to an expected summer demand surge.
Biden is expected to make the announcement at 1800 GMT.
The White House asked the CEOs of seven oil companies to a meeting this week to discuss ways to increase production capacity and reduce fuel prices of around $5 a gallon as they make record profits.
Chevron CEO 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. 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 Corp this week.
The $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, U.S. oil refining capacity fell in 2021 for the second year in a row, government data showed on Tuesday.