While we’ve seen up-and-down spikes in stock market indices, cryptocurrency values and the prices of crude oil and motor fuel in recent years, the price of one important commodity has been quietly but relentlessly rocketing higher — octane, the primary yardstick of gasoline quality and price. The steady rise in octane prices is tied in part to the fundamental change in how octane is valued, with the retail market now being impacted more by demand than production costs. In today’s RBN blog, we look at why octane prices have climbed over the past decade and what market factors are limiting its supply.
It’s understandable for politicians to want energy markets to bend to their will — especially when it comes to gasoline prices. No one likes spending $60, $70 or $80 to fill up their car, SUV or pickup and, well, drivers are voters. The problem is, there’s no simple way to bring down gas prices, and that puts politicians in a quandary. Faced with public outrage, they feel pressured to respond and, with no easy fix at hand, they strain to develop legislative or regulatory “solutions” that in the end may not solve anything. In today’s RBN blog, we discuss the various efforts in the U.S. and overseas to monkey with market mechanisms and rein in the cost of motor fuel.
The swift increases in crude oil and gasoline prices that followed Russia’s invasion of Ukraine in February — and the sanctions that were implemented soon thereafter — spurred a lot of concern that the U.S. and global economies would go into a tailspin. In response, government officials here and abroad turned to their strategic reserves as a way to quickly balance the market and rein in prices while buying time for additional oil production to come online. But U.S. production growth and rig activity have hit a wall since June, when releases from the Strategic Petroleum Reserve (SPR) started to pick up steam, reducing the prospects for a significant output increase this year. In today’s RBN blog, we examine the changes in the market since the major withdrawals were announced, how the hoped-for bridge to higher oil production has so far failed to materialize, and why it’s unlikely the government will turn to the SPR if prices spike again soon.
The high cost of gasoline and diesel and their impact on inflation and the global economy has been a major market development this year, with the blame typically being cast on politicians, oil producers and policies intended to limit development of traditional energy resources and encourage decarbonization — and sometimes all of the above. Prices have retreated in recent weeks amid lower consumer demand and worries about the state of the global economy, but long-term concerns about global refining capacity and the possibility of another price spike remain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on the state of global refining.
What has been the most controversial topic in the U.S. refining industry over the last 10 years? Well, it’s a matter of opinion but, judging from time spent in earnings conference calls, law offices, courtrooms, congressional committees, the White House, and other forums of business and political debate, Renewable Identification Numbers — or RINs — would have to be a top contender for that prize. In today’s RBN blog and the final episode of this series, we consider two differing viewpoints on the effects of the RIN system and specific disagreements — or are they misunderstandings? — about the financial consequences of RINs that have dominated the debates and legal cases.
Refined product markets in the U.S. are constantly morphing. Over time, demand for gasoline and diesel rises or falls, refineries are shut down, and the price spread between products sold in neighboring regions widens or narrows. These changes can incentivize refiners and marketers to push into new areas — and encourage midstream companies to develop pipeline capacity to ease the flow of gasoline, diesel and jet fuel into newly attractive markets. Midstreamers have advanced a number of pipeline projects in the past few months to help move increasing volumes of products west across Texas to the Permian, the Great Plains and into the Rockies. In today’s RBN blog, we discuss these projects and what’s been driving their development.
Since the century turned, there’s been a big buildup in refining capacity in the U.S. Midwest, primarily to process the increasing volumes of heavy sour crude being piped in from Western Canada. Over the same period, refining capacity in the Mid-Atlantic region has declined by more than half, mostly for economic reasons — including the lack of pipeline access to favorably priced U.S. shale oil — but also due to events, such as the devastating June 2019 fire at Philadelphia Energy Solutions’ 330-Mb/d refinery in Philadelphia, which led the facility’s owner to shut it down. In addition to spurring more refined product imports to the Mid-Atlantic and increased flows to the region on Colonial Pipeline, the changing market dynamics prompted a push to increase pipeline flows of gasoline and diesel east from the Midwest to markets in Pennsylvania and beyond. In today’s RBN blog, we continue a review of the U.S.’s still-morphing refined product pipeline networks with a look at recently added capacity from PADD 2 to PADD 1.
The cost of gasoline has garnered a lot of headlines since the start of 2022, with the blame for elevated prices falling on seemingly everything and everyone, from the Biden administration’s policies on oil exploration to Russia’s invasion of Ukraine, as well as decisions by major U.S. producers and OPEC not to swiftly boost oil production. Another can't-be-ignored culprit is the loss of significant U.S. refining capacity over the last few years, which has limited the ability of refiners to respond to the strong, post-COVID demand recovery by ramping up production. By and large, the refineries still operating have been running flat out. In today’s RBN blog, we look at the state of global refining, where new capacity is likely to be built, and the headwinds to future investment.
U.S. gasoline and diesel prices have been sliding the past couple of months, but there's still a lot of angst among politicians and the general public about the cost of motor fuels — and who's to say prices at the pump won't soar again, spurring another round of proposed "fixes" to the markets for crude oil and refined products. Among the proposals floated when prices spiked this spring were bans on the export of U.S.-sourced crude, gasoline and diesel, the idea being that suspending exports would increase the supply available to domestic markets and thus bring down prices. If only it were all so simple! In today's RBN blog, we discuss the complicated ins and outs of oil, gasoline and diesel imports and exports, and the many effects of putting the kibosh on shipments to international markets.
U.S. exports of crude oil, LNG, NGLs and refined products have moved into the spotlight on the world stage. Within the past few years, global markets have come to rely on U.S.-sourced hydrocarbons to meet critical needs for energy supplies. But export volume growth has slowed. Demand in the U.S. is ramping up, leaving less available for shipment overseas. And some members of Congress are encouraging the Biden administration to curtail or even ban some exports. What’s next for U.S. hydrocarbon sales to international markets? Will U.S. exports be there to challenge Russia’s use of oil and gas as political weapons? Or could market, logistical and political forces disrupt the flows that are meeting energy needs of the world? Today, we preview the deep dive into these issues on the agenda at RBN’s upcoming xPortCon conference.
Refiners and the U.S. Environmental Protection Agency (EPA) have locked horns in a dispute over Renewable Identification Numbers (RINs). Now in its 10th year, the dispute stems from contradictory premises about how RINs affect the profits of the refiners and blenders who produce the ground transportation fuels sold in the U.S. To form an opinion of what ought to happen next, you need to understand the fundamentals of how RINs work in light of the RIN being a tax and a subsidy that forces renewables into fuels. In today’s RBN blog, we focus on how RINs force renewables into fuels and address the related question: Do RINs increase the price consumers pay for gasoline?
Refining margins today — whether in the U.S. Gulf Coast (USGC), Rotterdam or Singapore — are at record highs. Given current high crude oil prices, gasoline and diesel prices at the pump everywhere are also at unprecedented levels, making refinery profits a major topic of conversation — and not just for politicians. While some of the explanations of refining margins are just political talking points, several others are well-established and accepted, and still others consider factors that are less frequently cited, even by those familiar with energy markets. One such factor is the price of natural gas and how it’s impacting refinery operations and competitiveness around the world. Today’s RBN blog discusses the crucial role natural gas prices play in refinery operating expenses and refining margins, and examines how favorable natural gas prices in the U.S. are providing a substantial competitive advantage for domestic refiners.
Refinery closures. Shifting demand for gasoline, diesel and jet fuel. Yawning price differentials for refined products in neighboring regions. These and other factors have spurred an ongoing reworking of the extensive U.S. products pipeline network, which transports the fuels needed to power cars, SUVs, trucks, trains and airplanes — not to mention pumps in the oil patch, tractors and lawnmowers. New products pipelines are being built and existing pipelines are being repurposed, expanded or made bidirectional, typically to take advantage of opportunities that midstreamers, refiners and marketers see opening up. In today’s RBN blog, we begin a review of major pipelines that batch gasoline, diesel and jet fuel and look at the subtle and not-so-subtle changes being made to the U.S. refined products distribution network.
In film and television, the “boxed crook” trope is where a condemned person is sought as a last-ditch effort to pull off some impossible mission or overcome a formidable opponent. In return, the convict is typically offered amnesty or other consideration by the operatives in charge. Millennials will probably think of the recent Suicide Squad movies. For Generation X, The Rock starring Sean Connery was a great example. And for the boomers, it was The Dirty Dozen. Our current situation in the U.S. energy sector may not be quite as thrilling as those movies but the same plot elements exist. In today’s RBN blog, we discuss the predicament faced by industry and political leaders and begin to sort out the various proposals to put a lid on prices and restore energy security.
In the next few days, U.S. Energy Secretary Jennifer Granholm will hold an emergency meeting with leading energy executives to discuss steps E&Ps and refiners could take to increase crude oil production, refinery capacity and the production of gasoline, diesel and jet fuel, all with the aim of reducing prices. The prelude to the get-together was less than ideal, though. In a June 14 letter to the top brass of four integrated oil and gas giants and three large refiners, President Biden criticized them for “historically high refinery profit margins” and for shutting down refining capacity before and then during the pandemic. In addition to rejoinders from the companies, the American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM) defended their actions, discussed the complexity of refined products markets, and asserted that the Biden administration’s statements and policies have actually discouraged investment in refining and oil and gas production. Is there a middle ground here? In today’s RBN blog, we look at the high-level correspondence and discuss how at least some compromises might be possible.