They're Reading The Blog: Forget Production, Transport; It's All About Refining -- May 26, 2022

Link to Charles Kennedy. 

US refiners set to add just 350,000 bpd capacity by end-2023.

I did not read the article. The headline told me all I need to know. [Later: I read the article; a good article; well worth the read.]

From Bloomberg, today, May 26, 2022, 1:45 p.m. CDT: 

The Biden administration is reaching out to the oil industry to inquire about re-starting shuttered refineries as the White House scrambles to address record high gasoline prices that setting off political alarm bells ahead of the midterm elections. 

More than 1 million barrels a day of the country’s oil refining capacity — or about 5% overall — has shut since the beginning of the pandemic. Elsewhere in the world, capacity has shrunk by 2.13 million additional barrels a day. And with no plans to bring new U.S. plants online, even though refiners are reaping record profits, the supply squeeze is only going to get worse.

It sounds like the administration is grasping at straws, or whatever it is they grasp for now that we're not supposed to be using straws. (Yes, I know "we" are talking about "different" straws.)

At the end of the day, all indications are that demand will eventually outrun supply. 

Later, 9:54 p.m. CT: when I came back to edit this post, it dawned on me that Europe is in a world of hurt. Let's assume, for argument's sake, there really is no spare capacity, and that two, three, four years from now global demand will be one barrel more than global supply.

Global supply is pretty much fixed -- how much is being produced and where it's going. If global demand is one bbl short, there will be a free-for-all to get that last bbl. Of the three major players (Russia, Mideast, and US) the US has the most flexibility and potential to cut off oil exports ... for example, cut off oil exports to Europe. In fact, the White House press secretary has stated that cutting US exports to Europe is an option still on the table. Think about that. Think what Europe is going to be paying for oil if US suddenly withholds exports, and knowing that the Saudis have said they don't have the spare capacity to make up the difference. 

Just a rambling thought.

By the way, this raises a number of other issues: the morality of an oil embargo, and even the legality of an oil embargo from a global legal point of view. The same questions raised during the OPEC embargo decades ago.