The Oil Drum

32 comments on This Week in Petroleum 10-31-07

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memmel on October 31, 2007 - 12:44pm

Robert one of the big signals I'm watching for is a decrease in gasoline imports. I think this is the first signal we will see that supplies are actually a problem for the US.

I'm at a complete loss as to why we can continue to get the gasoline imports we are getting. My best guess for the moment is that Diesel/Heating fuel manufacturing is causing a slight glut of gasoline even with the refineries reconfigured.

So the question would be assuming that diesel demand is high in Europe for example does it make sense for them to end up with excess gasoline even with the refineries optimized ?

I would think that even though output can be tuned its only within a certain range and because of the stronger diesel demand in Europe they may always produce excess gasoline for export so its a sort of might as well do it since they are configured to send gasoline to the US. Next the Euro price for oil is a lot lower than the dollar price this means it may actually be cheaper to buy oil in Euros refine it in Europe and ship it to the US than to buy and refine oil internally in the US ? So a strong Euro paradoxically results in cheap gasoline imports from Europe for the US. I think this monetary situation may be the real answer.

Its a complete mystery to me I expected and still expect a sharp increase in price of gasoline for export that has to be passed on regardless of what the internal US refining capacity and margins are.

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jkissing on October 31, 2007 - 12:53pm

We are getting shipments from china that their citizens cannot buy on account of prices too low... producers are shipping every barrel they can out of the country because prices are controlled, causing diesel and other rationing. Harmful to the economy, eventually prices will rise and internal demand along with it, at which point we will receive reduced product shipments.

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memmel on October 31, 2007 - 1:19pm

I was aware of what seem to be serious problems in china that will eventually force them to expand imports and lower exports. Does anyone have any numbers on how much gasoline china exports ? It does not have to be to the US since the export market is fairly fungible.

The critical factor for the US is in my opinion when gasoline exports start to falter not when the US runs low on crude imports. I pretty much ignore US crude inventories I don't think they will matter for a long time. We will be able to import as much crude as we can refine well after gasoline imports drop substantially or at the minimum stop growing.

In the interim US crude oil imports play the role of setting the floor price for crude. Something has to break on the gasoline export/import side of the equation soon for the US as your China example indicates. They have to either start decreasing or increase substantially in cost soon.