Chevron CEO Mike Wirth warned Wednesday it would be “unwise” of the US to impose a ban on diesel exports, saying such a policy could actually make the global energy crisis worse.
The comments came after President Trump recently ruled out such a ban, though he threatened one last month. The commander-in-chief said the measure was not necessary after European countries heeded his demands to release fuel from their reserves.
“Export bans, be they in the US or in other countries, actually take supply off the global market and they run the risk of making the situation worse,” Wirth told CNBC’s “Squawk Box Europe.”
“The US has been a reliable supplier to the world at a time when it needs it,” he said. “And I think it would be unwise for the US to create questions in the minds of our allies and our partners as to whether or not we will be there with reliable supply when times are difficult.”
Trump previously said he was “very seriously” considering a ban on diesel exports from the US — the world’s biggest supplier of the substance — in a bid to lower prices ahead of the November midterm elections.
Such a ban could immediately reduce US prices by 30 or 40 cents a gallon, but the relief would be short-lived, according to Joe Adamski, managing director of ProcureAbility, a supply chain consultancy. As the US market becomes flooded with supply, producers would start losing money and move their distillate refineries elsewhere, he said.
Trump took the ban off the table on Friday, after Europe agreed to release up to 100 million barrels of diesel and crude oil. The president also signed an executive order this week allowing a more widespread use of tax-exempt diesel.
“Europe has a lot of diesel, and they’re going to be making a major world contribution, and so are we,” Trump was quoted as saying by Politico. “And we’re not going to be doing the export ban.”
Brent crude oil rose 2% to $102.55 a barrel Wednesday as traders grew concerned about dwindling reserves amid fresh Houthi attacks in Saudi Arabia and storm-related production shutdowns off the US Gulf Coast.
Asked whether global crude inventories are fragile ahead of the winter season, Wirth described it as a “very serious” situation.
“We came into this year with high inventories. High inventories in commercial stocks held by companies, high inventories in strategic stocks held by governments around the world and actually significant inventories on the water, particularly barrels that were sanctioned by the US or the EU,” the exec said.
“Over the last several months, we’ve seen commercial inventories draw down, strategic stocks be released and those sanctioned barrels have been relieved and allowed to be delivered, as well.
“Those are all buffers in the system that have bought us time, but they’ve been drained. And so, we’re at much lower levels of inventory right now and it makes the system more vulnerable to disruption.”
The US Strategic Petroleum Reserve now stands at roughly 283 million barrels, its lowest level since the 1980s, after a coordinated global release of 400 million barrels earlier this year.
Wirth also said Venezuela will play a key role in the oil giant’s long-term strategy.
Last month, Chevron vowed to more than double its production in the country over the next five years, a major win for the Trump administration after its capture of Venezuelan dictator Nicolás Maduro in January.
A $7 billion investment in Venezuela will allow the company to increase production to 600,000 barrels a day by 2031, up from roughly 280,000 barrels per day.
“Longer term, I think Venezuela can be part of a more secure energy system. Venezuela is coming off a relatively low starting point – there has not been much investment in the country,” Wirth said.
“We have a good position there that we intend to grow, but that takes time and the amount of production that Venezuela can add over the next short period of time is dwarfed by the amount that is at risk in the Middle East.”
Shares in Chevron are up 33% so far this year. In July, the energy giant reported its highest quarterly profits in six years, beating Wall Street estimates on soaring crude oil prices.
