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.
Posts from John Auers
We often tend to focus on the U.S. refining picture, but, just like crude oil, refined products trade globally, and international closures ultimately have the same effect as domestic ones on the worldwide products market. Recent international closures have been distributed throughout the world — concentrated in developed countries, including several in Europe, as well as Japan, Singapore, Australia and New Zealand, but also in some developing economies like South Africa and Sri Lanka. Most of these capacity reductions were driven by the same forces as in the U.S., namely, poor economics as a result of the pandemic-lockdown-driven demand plunge in 2020 and 2021, as well as expectations that margins would take a long time to recover post-COVID. Of course, worries that the energy transition and policies to that end would suppress demand in the long-term also played a key role, as did some fundamental competitiveness issues at individual facilities. In today’s RBN blog, we take a closer look at the more than 2 MMb/d of international capacity closures since 2019.
Refineries in the Rocky Mountains region, defined by the Energy Information Administration (EIA) EIA as Petroleum Administration for Defense District (PADD) IV, are smaller and less complex than they are in the rest of the U.S. The region is landlocked and the 16 refineries – average size only 42 Mb/d - rely on U.S. light sweet crude produced locally or in North Dakota as well as Western Canadian heavy crude. The combination of rich supplies of crude and increased demand for refined products such as diesel means that refinery margins are high. These healthy economics are encouraging refinery expansions. Today we examine these plans.
No, we aren’t talking about Colorado’s recent legalization of the “wacky weed”, but rather the high that the rush of light crudes is bringing to the refining industry in PADD IV, the Rockies region. While John Denver’s famous lyrics spoke of the magic of the Rocky Mountains, regional refiners have found elation in recent years as both domestic and readily accessible Western Canadian production increased, stranding crude supplies, putting downward pressure on prices and lifting their margins sky high. Today we examine how this has impacted the economics of the region and incentivized investment.