One reason I think why gasoline and distillate inventories are not growing is that refining capacity has decreased significantly since Covid (see DOEPOPCP Index), they cannot produce more than they currently are in the US. They also have an advantage to European peers as their energy cost is lower so they export whatever they can at a good margin. Recent talks by downstream players also points toward no new capacity coming up in the US given the long term view that ICE are phasing out to leave the place to EV.
I guess you're too polite to mention that the prime motivation of the Biden administration in draining the SPR was to lower gasoline prices prior to the November election. Also, the majority of the oil released from the SPR to date was sour crude which U.S. refineries cannot use in general. So at least some that sour crude is being exported and replaced by sweet crude from the ME and other sources. Sour crude inventories in the SPR are getting very low now so that strategy is about over. It will be interesting to see if the SPR is ever replenished. Personally, I doubt it. Which means it won't be available in a real emergency. Thanks for this thought provoking pieces.
It shows "Petroleum Products" as a net import of -4,457 for the four weeks ending on Sep. 23, 2022. A year ago this number was -2,354. Total imports is now -1,749 where a year ago it was 1,094 (all figures
in thousands of barrels).
The negative number means the USA is exporting. Hence, the crude released from the SPR is being bought by US refiners, turned into gas or diesel, then shipped overseas, so it never appears in the US inventory levels.
Capitalism is why products are being shipped abroad. The US politicians can jawbone energy producers, in front of the election to a degree, but the flows show that the US is for the time being a net energy exporter.
This also helps explain the strength of the US dollar compared to the last several decades where the USA was a net energy importer....
HI Russell,
One reason I think why gasoline and distillate inventories are not growing is that refining capacity has decreased significantly since Covid (see DOEPOPCP Index), they cannot produce more than they currently are in the US. They also have an advantage to European peers as their energy cost is lower so they export whatever they can at a good margin. Recent talks by downstream players also points toward no new capacity coming up in the US given the long term view that ICE are phasing out to leave the place to EV.
Hi Russell,
I guess you're too polite to mention that the prime motivation of the Biden administration in draining the SPR was to lower gasoline prices prior to the November election. Also, the majority of the oil released from the SPR to date was sour crude which U.S. refineries cannot use in general. So at least some that sour crude is being exported and replaced by sweet crude from the ME and other sources. Sour crude inventories in the SPR are getting very low now so that strategy is about over. It will be interesting to see if the SPR is ever replenished. Personally, I doubt it. Which means it won't be available in a real emergency. Thanks for this thought provoking pieces.
You should only speak on things you are knowledgeable about. This write up is woefully inaccurate.
https://www.nasdaq.com/articles/america-produces-enough-oil-to-meet-its-needs-so-why-do-we-import-crude
Hi Russell,
You are looking at the inventory of US Distillate & Gasoline stocks. That "extra" oil which is being run through the refineries is being exported!
Look at the bottom of page 5 of the weekly petroleum status report:
https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
It shows "Petroleum Products" as a net import of -4,457 for the four weeks ending on Sep. 23, 2022. A year ago this number was -2,354. Total imports is now -1,749 where a year ago it was 1,094 (all figures
in thousands of barrels).
The negative number means the USA is exporting. Hence, the crude released from the SPR is being bought by US refiners, turned into gas or diesel, then shipped overseas, so it never appears in the US inventory levels.
Capitalism is why products are being shipped abroad. The US politicians can jawbone energy producers, in front of the election to a degree, but the flows show that the US is for the time being a net energy exporter.
This also helps explain the strength of the US dollar compared to the last several decades where the USA was a net energy importer....
Cheers,
Chris Ridder, CFA