The Great Debate

– John Kemp is a Reuters columnist. The opinions expressed are his own –

U.S. oil refiners have relied heavily on exporting surplus gasoline and especially distillates to help offset plunging domestic demand over the last eighteen months.

Record product exports have averted a much deeper crisis within the industry, an even bigger collapse in gross margins and a huge inventory build.

But as the spreading slowdown cuts demand in key export markets across Europe, Asia and Latin America, the export window is set to close. Refiners look set to respond with unseasonal run cuts over the next two months to prevent a massive stock build before spring.

The total volume of gasoline supplied to the U.S. domestic market has fallen 80 million barrels (3.1 percent) from 2.539 billion barrels in January-September 2007 to 2.459 billion barrels in January-September 2008.

– John Kemp is a Reuters columnist. The views expressed are his own –

Even by the standards of a deep-cyclical industry, the “golden age” of oil refining has proved remarkably brief, lasting no more than three years, before giving way to a new dark age.

Particularly in the United States, refiners have returned to the state of chronic unprofitability that plagued the industry before 2005.