Page 8 - LatAmOil Week 20 2022
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LatAmOil                                      COMMENTARY                                            LatAmOil


                         These problems are not confined to Africa’s   Strategic Petroleum Reserve (SPR), but to lim-
                         larger economies, though. Senegalese flights   ited effect.
                         to Paris have routinely been forced to make   Refiners are still struggling to keep up with
                         fuel stops in the Canary Islands of late, and the   demand, and the fact that US refining capacity,
                         country’s largest airport has been requesting that   at 18.1mn bpd, has dropped to its lowest level
                         incoming flights take measures to ensure they   since 2015 is not helping. EIA data show that
                         carry enough fuel for the return flight.  diesel inventories on the US East Coast have
                                                              fallen considerably below typical levels.
                         Middle East                            But there are other factors at work too. For
                         While Dakar has blamed “unfavourable inter-  the US, these developments represent a contin-
                         national conditions,” the oil industry’s de facto   uation of dynamics that emerged because of the
                         kingpin, Saudi Arabia’s Energy Minister Prince   coronavirus (COVID-19) pandemic. A slump in
                         Abdulaziz bin Salman Al Saud, has come to the   demand in 2020 forced a number of US refiner-
                         defence of producers.                ies to close, while others opted to convert their
                           As he has done repeatedly with reference to   plants to biofuel production. Now, the reopen-
                         upstream investment, the minister said on May   ing of economies and the resumption of travel
                         9 that underinvestment in global refining capac-  is combining with disruptions related to the
                         ity was to blame for fuel supply shortages and   Ukraine war to drive up demand and prices for
                         high prices. “All mobility fuels have skyrocketed   fuel, including diesel and jet fuel. Meanwhile, as
                         ... and the gap between crude prices and these   other countries shun Russian fuel, they increas-
                         products in some cases is actually 60%,” he said.  ingly look to other sources, including the US, for
                           “The facilities that can convert oil into usea-  supply.
                         ble products have shrunk and ... are shrinking.   The US is by far the world’s largest producer
                         So, is it an issue of crude availability? The answer   of jet fuel, and output has been steadily rising
                         is ‘no,’” he told attendees at an industry event in   as both domestic and international air travel
                         Bahrain.                             has rebounded from the early waves of the pan-
                           Highlighting a 650% increase in refining   demic. This is expected to continue, but it will
                         margins compared to the five-year average   put pressure on some elements of an already
                         between March 2021 and today, he said this   stressed distribution network.
                         clearly shows that “there is no refining capacity   For diesel, pressures look set to be exacer-
                         commensurate with the current demand and the   bated further still by the arrival of the summer
                         expectation of demand this summer.”  driving season in the US. Record-high prices
                           As if to hammer home his point, Prince   have not yet dented demand.
                         Abdulaziz then called for “people to reconsider
                         what they are doing with their taxing if they are   Latin America
                         complaining about crude prices and refined   In Latin America, the war in Ukraine and the
                         product prices.”                     removal of Russian barrels from the world
                                                              crude market does not seem to have led directly
                         North America                        to extensive disruptions to diesel or jet fuel sup-
                         But complaints about prices have certainly   plies, despite the fact that many of the countries
                         flowed freely in the US. Both diesel and gasoline   in the region depend on US imports.
                         prices have continued to hit new record highs in   However, fluctuations in crude oil prices
                         that country.                        have caused the price of refined products to go
                           This is partly because the war in Ukraine   up in most Latin American countries. Fuel tariff
                         has disrupted global flows of crude and refined   hikes have helped trigger street demonstrations
                         products. US President Joe Biden has attempted   and strikes in multiple countries, including but
                         to ease the pressure on fuel prices by releas-  not limited to Chile, Honduras, Paraguay and
                         ing large volumes of crude from the country’s   Trinidad and Tobago.
























                               Crude oil prices are only one component of product prices at the pump (Saudi Arabia Ministry of Energy)



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