Export window closes for U.S. oil refiners
– 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.
Distillate supplied has fallen 70 million barrels (6.1 percent) from 1.148 billion barrels in 2007 to 1.079 billion in 2008.
Refiners have responded with deep run cuts, supplemented with process adjustments to increase the yield to distillates, and heavy exporting to try to limit the build up of unwanted stocks and provide support for pressured margins.
Bleak outlook for U.S. oil refiners
– 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.
U.S. refiners now have too much capacity and produce the wrong products (gasoline) in a fuel economy increasingly dominated by ethanol and diesel. Capacity cuts of as much as 0.5-1.0 million bpd (equivalent to 4-8 average refineries) and expensive investment to reconfigure the system to increase the diesel yield seem inevitable.
EVAPORATING PROFIT MARGINS
In May 2007, U.S. refiners paid an average of about $64 a barrel to acquire high quality West Texas Intermediate (WTI) crude (less for other grades) and sold gasoline for $97 per barrel – a margin of $33 per barrel or 52 percent.
2008
5:56 am GMT
– well in this situation both demand and supply should be
– balanced that poor consumer would not effect badly like
– what happen in past when the prices was very high and
– people don’t have money to save. So both demand and
– supply should be balance equally that in future we all
– wont face the supply shortage and again it gonna jump
– to above $100.
– – Posted by Muttaqi
The futures market is the machine which does this balancing. The problem is that nobody knows what future conditions will be. We guess. We do the best we can. Anyone who is willing to put their money where their mouth is can participate, through the commodities and commodity futures market in this great feat of prognostication. People who have made good predictions in the past can use their profits to continue to predict. People who have made bad predictions lost money, and so are less able to move the market in the future. It ain’t perfect, but it’s the best *possible* system.
The problem with the Socialist ideal — the government should make these decisions for everybody — is that it presumes that anybody who works for the government is omnipotent and omniscent. Having lived under George Bush’s sad, pathetic reign should have eliminated that superstition, but the socialists now think that Obama has some magic ability to know the future. He doesn’t. Nobody does.
We are imperfect human beings, ignorant of our future, and we have two choices: we can accept our humanity, and live under a capitalist system where we are free to benifit when we’re right and take responsibility when we’re wrong, or we can switch to a socialist system where when the dictator is right everyone benifits and when he’s wrong everyone suffers — except for his henchmen, who still live well at our expense.
I’d rather suffer for my own mistakes than suffer for somebody elses. I’ll take capitalism any day.
