American Petroleum's Mike Sommers Talks Hormuz Oil Flows

**SPEAKER_1** (0:02)
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**Joe Mathieu** (0:07)
It's kind of amazing since we hear so much about the president's relationship with the oil industry. Well, we may not be seeing a lot of additional drilling. It's kind of a vibes thing that there's just more positive energy in the energy space when it comes to this administration. But stopping down to call them out, what are we looking at for a gallon of gas today, Kailey? $4, according to AAA, and 8 cents nationally.
And we wanted to talk this out with Mike Sommers. I'm guessing he was listening to this as well. Mike, of course, runs the American Petroleum Institute, where he's president and CEO, speaking for the industry. It's great to see you, Mike. And welcome back to Bloomberg.
Is this an argument within the family? How would you describe the relationship between this administration and your industry? And what's you're looking for here?

**Mike Sommers** (0:53)
Well, first of all, I give the president a lot of credit. His energy dominance agenda has really made the difference. We've opened up the Gulf of America again for production. We have more production on federal lands and of course in federal waters. Their regulatory agenda has been very positive to the American oil and gas industry. There's no question. This president has been focused on more production here in the United States. And that has provided a buffer during this time when the Strait of Hormuz has been effectively closed. So I give him a lot of credit for his energy dominance agenda.
At the same time, we know that this industry is a price taker, not a price maker. And because the Strait of Hormuz has been shut down for basically five months, we're of course going to be dealing with higher prices at the pump.

**Kailey Leinz** (1:36)
So in other words, is higher profit not a choice? Or could they make a different choice?

**Mike Sommers** (1:42)
Well, of course. This is an industry, as I said, we are price takers, not price makers. And as a consequence of the Strait of Hormuz, which has been 20 million barrels of oil a day, not making it through the Strait, you're going to have to deal with higher prices. I'll remind you though, in 2020, I was actually in a meeting with the president in the cabinet room where this industry was actually dealing with low prices, in fact, negative $32 prices. And that was a time when this industry was making virtually zero earnings. So this is a commodity business. Prices go up, prices go down. We have to deal with the price swings.
And on average, this industry actually makes fewer earnings than other large industries like tech, like finance.
So this is an industry that we do have to deal with those highs and lows. And high prices now mean investments for future production. One example of that is during the 2008-2012 period, when we were dealing with significant earnings at that point too, that allowed us to finance what eventually became the shale revolution, the fracking revolution, which allowed us today now produce about 14 million barrels of oil every single day.

**Joe Mathieu** (2:48)
Surely the president understands everything we're talking about here, right?
He knows that there's a refining bottleneck in this country, that there's a disconnect. We talk about crack spreads between the price of crude and what we pay at the pump. That distilled products are their own story. Is he just sounding the populist alarm in an election season? I feel your pain.

**Mike Sommers** (3:08)
Well, I do think that everyone is concerned about high prices at the pump for American consumers and high electricity prices.

**Joe Mathieu** (3:14)
I'm calling you guys out by name, though, ExxonMobil and Chevron.

**Mike Sommers** (3:17)
Absolutely. But we understand that we're in an election year and we're going to have to deal with that kind of incoming. But at the same time, American consumers have to understand that during this time of high earnings, this is the time when we invest for future production going forward.

**Kailey Leinz** (3:32)
Well, as Joe's talking about the political considerations here, that arguably is why we've seen the president float things like a gas tax holiday, for example. Do you fear that he could even go so far if we see prices permanently above $4 a gallon, for example, to suggest that maybe there should be export bans put in place in this country? What would that do?

**Mike Sommers** (3:51)
Well, we would also be very concerned about any kind of an export ban. I will say that there are a lot of policies that they put in place that have provided some kind of a buffer. For example, the Jones Act waiver that they put into place. There are other things they could do. There are changes that they could make to the renewable fuels standard right now that are providing a higher price at the pump that we don't need to sustain right now, given the kind of challenges that we have.