Kevin Bae

Non-Social in a Socially Networked World

U.S. refines 1 million barrels of oil a day less than before pandemic

U.S. refineries closed less profitable plants during the pandemic, are performing maintenance on some, and have no plans to open new ones in the foreseeable future. They’re operating at 90% which can’t be good should something go wrong anywhere.

As fuel demand crashed during the pandemic, refiners around the world permanently closed older and less profitable plants. Around 3 million barrels a day of global refining capacity closed during the pandemic and 1 million barrels a day of that was in the U.S., according to JPMorgan Chase.

Bottleneck Fuels Record High Gas Prices – WSJ

With 20 years to recoup the initial investment and demand prior to the pandemic waning what company is going to risk trying to open a new refinery when the government can yank the rug out from them at any time.

When the pandemic took hold, companies took the opportunity to shut down older plants in the world’s richest countries, including the U.S., Australia and Europe. Despite a resurgence in fuel demand, refining companies’ views on demand’s long-term trajectory haven’t changed. A refinery can take 20 years to recoup the initial investment, making the current business case for a new plant dim.

Bottleneck Fuels Record High Gas Prices – WSJ

We’re already over $4/gallon nationally. This is another unprecedented first for the Biden Administration. Energy analysts predict it’s only going to get worse.

Many energy analysts and executives believe high fuel prices will persist for the rest of the year and may even get worse.

The end of spring maintenance season for fuel makers could add an additional 2.5 million barrels of capacity as plants come back online, according to JPMorgan Chase, potentially preventing further draws on stockpiles. But Covid-19 lockdowns in China are keeping a lid on global fuel demand, and if those lift, there will be even more competition for tight fuel supplies.

Bottleneck Fuels Record High Gas Prices – WSJ

Image by Gerd Altmann from Pixabay