Page 8 - LatAmOil Week 20 2022

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)

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