I can’t figure out if I’m reaching – or I’ve already reached the age where I am repeating myself to make sense of something – or maybe I’ve developed a stutter when it comes to orating on energy questions?
This affliction is especially evident when asked to comment on the short, medium, and dare I say, long-term forecasts for gasoline and diesel prices.
As we are about to cross the Rubicon into the land of the driving season, the pricing landscape has a few twists and turns that may be difficult for consumers to navigate.
First of all, gasoline, pump, and diesel wholesale, or loading rack prices in Canada are not made in Canada. The 49th parallel does not exist when it comes to refined product pricing. In fact, the same goes for consumers south of the border as prices are not stamped “Made in the USA.” Taking it to another degree of confusion, we can get rid of all the borders too, since all refined product pricing follows decisions made at a global not parochial level.
Much has been said that prices in the U.S. could be brought back to a politically comfortable level if they just stopped exporting crude and refined products. In other words, keep these at home to increase inventory levels and lower pump prices.
The crude oil export ban was activated in 1975 and reversed in 2015. It was found that the initial ban had no effect on lowering gasoline prices but instead increased them.
This discouraged the U.S. oil industry from increasing domestic production, which then lowered inventories, instead of increasing them.
If the Biden administration is going to fall into the same trap by reactivating the export ban on crude and refined products, we may as well watch reruns of The Gong Show.
Cutting back U.S. crude exports will only fog the global inventory picture. The Brent crude price, which is the global benchmark, will only increase.
This will be followed in tag team fashion with a similar increase here in North America with West Texas Intermediate (WTI) prices jumping.
Then, you guessed it, prices of gasoline and diesel will go up, which is the exact opposite of what the plan was intended to accomplish.
Or was that the plan to begin with?
– Roger McKnight – B.Sc., Senior Petroleum Analyst