We have a problem: oil refining capacity cannot keep up with the demand for fuels
According to a new analysis from Vortexa, the price of global refined products is rising, even more than crude oil itself, as the demand for such refined products is proving too much for refineries to keep up.
Inventories of refined products are now near historic lows, and given the refining maintenance season coming to Asia and Europe soon, it appears that such low inventory levels will become a problem.
Most refineries in Asia and Europe enter refinery maintenance season in the second quarter. But so far, says Vortexa, there is no indication that those refineries have plans to increase production before the maintenance season to provide a minimum stock to avoid a price increase.
This means that the shortcomings in today's offer could become even more impactful.
One might think that the current high prices are driving an increase in supply, and in the production of refined products, but there are difficulties: high costs of natural gas and oil, in addition to an increase in carbon taxes in Europe, reduce the net profits of refineries and pushes not to increase supply. .
This effect is already being seen in the US with a decline in gasoline supply.
Worldwide, unused refining capacity is not widely available. According to Vortexa, Japan is one of the few countries with spare refining capacity, but Japan has also increased production rates by 40% over the past two months compared to June 2021. Mexico also has spare capacity, but this capacity has not been exploited in years and there are doubts that it is still effective. China also has spare capacity, but under tight control of the nation.
Only a major increase in the prices of refined products is likely to induce China and Mexico to bring some of that capacity back online, but it will cost a lot.
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The article We have a problem: the oil refining capacity fails to follow the demand for fuels comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/abbiamo-un-problema-la-capacita-di-raffinazione-non-riesce-a-seguire-la-domanda-di-carburanti/ on Wed, 16 Feb 2022 08:00:58 +0000.