U.S. oil refiners see gasoline, diesel exports threatened amid government price concerns
U.S. oil refiners that supply most of the nation´s consumption of about 8.8 million barrels per day (bpd) of gasoline and nearly four million bpd of diesel, as well as shipments to areas abroad that have grown increasingly dependent on U.S.-made fuels, said on Oct. 2022 that they were worried about an export ban.
The American Fuel and Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API) said on Oct. 4 that U.S. President Joe Biden may restrict or even ban fuel exports. The comments coincided with some of the biggest fuel price volatility since the start of the Russia-Ukraine war.
U.S. average consumer gasoline prices saw early Fall 2022 increases compared with the week, month, and year earlier.
The U.S. fuel price increases followed a decision by the Organization of Petroleum Exporting Countries (OPEC) to reduce supplies by two million barrels per day. The world´s consumption has been about 100 million barrels per day in recent years.
Fuel export ban concerns
Chet Thompson, the AFPM´s president and CEO, and Mike Sommers, API´s president and CEO, wrote on Oct. 4 to the U.S. Secretary of Energy Jennifer Granholm to express “significant concerns” about any possible fuel export ban.
Banning or limiting refined products exports may “decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war,” Thompson and Sommers wrote, according to the release.
The U.S. is exporting energy to multiple areas of the world that have become reliant like Europe or much of Latin America.
Out of the total estimated U.S. 18 million barrels per day refining capacity, just about 3.5 million barrels per day of gasoline, diesel, and other refined products are exported, the U.S. refiners said.
“Refiners’ crude oil acquisition costs represented close to 60% of the retail price at the gasoline pump in 2022, according to the EIA,” they said.
Energy Secretary Granholm made a reference on Sep. 30 to the profitability of refiners.
“This week’s letter from a company that made nearly $200M in profit every single day last quarter, misreads the moment we are in. The fact is this: Energy companies are making record profits, with refiners and retailers also posting margins that are well above average while passing the costs on to consumers,” according to the DOE.
Exxon Mobil Corp. on July 29, 2022 posted second-quarter 2022 earnings of $17.9 billion. The figure earned by the Irving, Texas-based company, when divided into the 90 days that roughly represents the length of a quarterly period, results in rounded daily profit of $200 million.
“Currently the average markup from wholesale to retail is about $1.27, compared to a typical 90 cents for this time of year. This price dynamic is possible because of ongoing refinery issues and a failure of companies to maintain sufficient regional inventories to buffer demand when refineries go offline, while those same companies export gasoline and diesel at record levels,” it added.
“If companies like ExxonMobil continue to believe that 'free market incentives remain the most efficient way for the industry to address these problems,' they need to step up and show results for American consumers and the American economy,” it said.
Fuel price spikes
As of Oct. 6 there were weekly gasoline price increases particularly in the West Coast and the Midwest in part due to supply issues while gasoline demand was high, according to the American Automobile Association.
The organization said that the national average for a gallon of regular gasoline in the U.S. as of Oct. 10 was closer to $3.92 per gallon, a 12-cent increase from the previous week, 19 cents more than a month earlier and 65 cents more than a year earlier.
That compared with about $4.85 per gallon in early June, when prices were approaching the peaks for the year they reached later.
U.S. fuel prices normally decline around October due to seasonal reasons that include changes in the fuel mix and also as higher fuel demand for summer driving normally slows.
U.S. motor gasoline imports in the week that preceded Oct. 6 averaged 480,000 bpd. During the same time the U.S. also imported 81,000 bpd of distillate fuels and exported 796,000 bpd of finished gasoline. and 1,656,000 bpd of distillates, according to GasBuddy, a news and analysis organization that in turned cited the Energy Information Administration (EIA).
In total, U.S. companies exported 10.6 million barrels per day of oil and petroleum products, according to the data published by GasBuddy and based on government agencies data.
The 45th Meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting took place on Oct. 5 in Vienna when a decision was made to reduce supplies by two million barrels per day.
Brent crude oil prices front-month futures traded at under $83 per barrel on Sep. 26. As of Oct. 10 those futures traded at over $96 per barrel.
The next meeting of OPEC, where Saudi Arabia is generally regarded as the strongest partner, will take place in early December. OPEC has 13 member countries.
The strongest member of the non-OPEC group is Russia.
The U.S., along with Russia and Saudi Arabia, is one of the three biggest oil producers. The U.S. authorized in 2022 the release of crude from its strategic reserves to prevent spikes with some results. The U.S. and China are the world´s biggest oil consumers.
On Sep. 19 the DOE said in a release that U.S. President Joe Biden authorized the release of 10 million barrels more out of the strategic reserves for November.
The U.S. government and refiners held talks in June over record-high fuel prices.
By Renzo Pipoli