Page 8 - EurOil Week 20 2022

EurOil COMMENTARY EurOil

So, is it an issue of crude availability? The answer Ukraine war to drive up demand and prices for
is ‘no,’” he told attendees at an industry event in fuel, including diesel and jet fuel. Meanwhile, as
Bahrain. other countries shun Russian fuel, they increas-
Highlighting a 650% increase in refining mar- ingly look to other sources, including the US, for
gins compared to the five-year average between supply.
March 2021 and today, he said this clearly shows The US is by far the world’s largest producer
that “there is no refining capacity commensurate of jet fuel, and output has been steadily rising
with the current demand and the expectation of as both domestic and international air travel
demand this summer.” has rebounded from the early waves of the pan-
As if to hammer home his point, Prince demic. This is expected to continue, but it will
Abdulaziz then called for “people to reconsider put pressure on some elements of an already
what they are doing with their taxing if they are stressed distribution network.
complaining about crude prices and refined For diesel, pressures look set to be exacer-
product prices.” bated further still by the arrival of the summer
driving season in the US. Record-high prices
North America have not yet dented demand.
But complaints about prices have certainly
flowed freely in the US. Both diesel and gasoline Latin America
prices have continued to hit new record highs in In Latin America, the war in Ukraine and the
that country. removal of Russian barrels from the world crude
This is partly because the war in Ukraine market does not seem to have led directly to
has disrupted global flows of crude and refined extensive disruptions to diesel or jet fuel sup-
products. US President Joe Biden has attempted plies, despite the fact that many of the countries
to ease the pressure on fuel prices by releasing in the region depend on US imports.
large volumes of crude from the country’s Stra- However, fluctuations in crude oil prices have
tegic Petroleum Reserve (SPR), but to limited caused the price of refined products to go up in
effect. Refiners are still struggling to keep up with most Latin American countries. Fuel tariff hikes
demand, and the fact that US refining capacity, have helped trigger street demonstrations and
at 18.1mn bpd, has dropped to its lowest level strikes in multiple countries, including but not
since 2015 is not helping. EIA data show that die- limited to Chile, Honduras, Paraguay and Trin-
sel inventories on the US East Coast have fallen idad and Tobago.
considerably below typical levels. They are also playing a role in Brazil’s upcom-
But there are other factors at work too. For ing presidential vote. The country’s incumbent
the US, these developments represent a contin- President Jair Bolsonaro, who hopes to retain
uation of dynamics that emerged because of the his job in the October election, depends on the
coronavirus (COVID-19) pandemic. A slump in political support of Brazil’s independent truck-
demand in 2020 forced a number of US refiner- ers. As a group, these truckers wield considera-
ies to close, while others opted to convert their ble influence, and they are outraged at the NOC
plants to biofuel production. Now, the reopen- Petrobras’ decision earlier this month to increase
ing of economies and the resumption of travel domestic diesel prices to keep them more or less
is combining with disruptions related to the in line with world market trends.

P8 www. NEWSBASE .com Week 20 19•May•2022