Are we there yet? Can we just turnaround and go back?
These are questions being asked with the “out of this world” prices we are seeing for all transportation fuels but especially for gasoline, the politically sensitive prima donna of fossil fuels.
Have pump and rack prices been ‘Putinized,’ and is he the sole reason for the price spikes?
Even before the invasion on Ukraine, and as I have written about in previous En-Pro Energy reports, U.S. inventories of crude and refined products were, and still are, well below the 5-year average. This, at a time when refineries are in their turnaround mode to prepare for the summer driving season. And, as we emerge from the pandemic, demand for gasoline is now up 11% and jet fuel is up 24%.
So, the teeter totter of supply and demand is far from being level. Even without any distractions, prices were bound to increase based on simple mathematics.
Then it got very complicated.
I often feel that politicians can’t see past their next election opportunities. To be sure, they certainly can’t read maps or satellite photos. We’ve been watching the steady build-up of Russian armaments at Ukraine’s border for weeks.
The threat was obvious.
The response from the west has been oblivious.
Oil exports total $300 million per day. Shutting that revenue stream would have given President Putin some pause for thought, or least reason for thought. Instead of sanctions on Russian oil, the financial route was chosen probably because shutting Russian oil imports would spike gasoline prices in the U.S. and drive a spike through President Biden’s mid-term election results, which could end up being his – end of term results.
But the financial constraints have ended up having the same effect as shutting down oil exports. The oil majors, the likes of BP, Shell, and Exxon decided to treat the Russian oil fields as a ‘placeo non grateo’ (my Latin).
Russian oil was finding it hard to find buyers for fear that purchasing Russian oil would trigger sanctions on the buyers. With the supply from Russia, “ever constricting,” pump prices are driving the prices up with no relief in sight. Although there has been mention of a global effort to access strategic reserves, but there are only three of those countries: the U.S., Japan, and China.
The International Energy agency claims that 60 million barrels could be released immediately. But, but, but… the global demand for crude is 100 million barrels per day.
So do the math.
IF is one of the most powerful words in the English language.
If only the XL hadn’t been cancelled by the now blushing President Biden.
If only the TransMountain were on stream instead of being stuck in environmental mud.
If only Energy East could get out of the west – then the pain at the pump would have been a mild irritant not a terminal migraine.
Foresight would have been a great forethought.
If only…
– Roger McKnight – B.Sc., Senior Petroleum Analyst
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