119416
  • Log in
The Daily Sceptic
No Result
View All Result
  • Articles
  • About
  • Archive
    • ARCHIVE
    • NEWS ROUND-UPS
  • Forum
  • Donate
  • Newsletter
The Daily Sceptic
No Result
View All Result

Why Is Gasoline So Expensive? Lack of Refining Capacity

by Noah Carl
10 June 2022 1:48 PM

The price of gasoline (petrol, to us Britons) has reached record highs in both Europe and the U.S. Americans are now paying almost $5 per gallon at the pump, compared to half that amount at the start of 2020.

Two major reasons for these price spikes are well known. First: OPEC slashed production during the pandemic in response to cratering demand, and hasn’t yet boosted output to pre-pandemic levels. Second: sanctions against Russia, as well as self-imposed restrictions on some exports, have reduced total oil production and fuelled uncertainty in the global market.

Okay, if the supply of oil is down, but demand is back up, then all we have to do is pump more oil, and the price of gasoline will fall – right? Not so fast. There’s an additional reason why the price of gasoline is so high: lack of refining capacity.

In simple terms, the way the oil market works is as follows: producers pump oil out of the ground; they then send it to refineries, which ‘crack’ the oil into gasoline, diesel and jet fuel; these refined products are then sold to the market. Which means that – regardless of how much oil is actually produced – the supply of gasoline is limited by refining capacity.

As commodities analyst Javier Blas notes, we can tell that refining capacity matters by looking at the ‘crack spread’ – the difference between the price of crude oil and the price of refined products.

In January of 2020, crude oil was trading at $65 per barrel, while the price at the pump was $109 per barrel. (To get the price at the pump ‘per barrel’, you simply multiply the price per gallon by 42.) As of today, crude oil is trading at $122 per barrel, while the price at the pump is $209 per barrel. This means the ‘crack spread’ has increased from $44 per barrel to $87 per barrel. (Note: there are more appropriate measures of the ‘crack spread’; I used this one for ease of explanation.)

Since the end of 2019, global refining capacity has dropped by about 2 million barrels a day. Why?

Dozens of refineries in the U.S. and Europe were shuttered during the pandemic – when they were simply not profitable to operate. And while new ones have been built in China, “that capacity is effectively out of reach of the global market”, Blas tells us.

So why don’t we just build more refineries, or reopen the ones that are closed? It’s not quite that simple, as both of these things take time. And in any case, companies are reluctant to make the costly investments that would be required to meet new environmental regulations.

The upshot is that even if Biden manages to persuade the Saudis to pump more oil, the price of gasoline is unlikely to fall dramatically any time soon.

Tags: inflationOilRefining capacity

Donate

We depend on your donations to keep this site going. Please give what you can.

Donate Today

Comment on this Article

You’ll need to set up an account to comment if you don’t already have one. We ask for a minimum donation of £5 if you'd like to make a comment or post in our Forums.

Sign Up
Previous Post

Net Zero Shock: Carbon Dioxide Rises AFTER Temperature Increases, Scientists Find

Next Post

Covid Vaccines Cause a New, Fast-Acting Form of Deadly ‘Mad Cow’ Neurological Condition CJD, Says Leading Virologist

Subscribe
Login
Notify of
Please log in to comment

Profanity and abuse will be removed and may lead to a permanent ban.

15 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

NEWSLETTER

View today’s newsletter

To receive our latest news in the form of a daily email, enter your details here:

DONATE

PODCAST

Nick Dixon and Toby Young Talk About the Davos Elites’ Prolific Use of Prostitutes, Clarkson’s Fightback and the Government’s Bizarre Plan to Ban Discouraging Teens From Becoming Trans

by Will Jones
24 January 2023
1

LISTED ARTICLES

  • Most Read
  • Most Commented
  • Editors Picks

Pfizer Doing Gain-of-Function Research to Mutate Covid and Make More Vaccines, Says Pfizer Executive in Explosive Undercover Video

26 January 2023
by Will Jones

U.K. Becomes Latest Country to Ban Covid Boosters for Under-50s

25 January 2023
by Will Jones

The Link Between the Massive Drop in Birth Rates and mRNA Vaccines is Undeniable

24 January 2023
by Dr Sven Román and Dr Jonathan Gilthorpe

Andrew Bridgen Sues Matt Hancock for £100,000 Over Anti-Semitic Smear in Vaccine Row

26 January 2023
by Will Jones

You Can’t Make It Up

26 January 2023
by Noah Carl

The Disastrous Covid Vaccines Risk Tarring All Vaccines With the Same Brush

62

Pfizer Doing Gain-of-Function Research to Mutate Covid and Make More Vaccines, Says Pfizer Executive in Explosive Undercover Video

40

Andrew Bridgen Sues Matt Hancock for £100,000 Over Anti-Semitic Smear in Vaccine Row

29

News Round-Up

28

Deaths Running 26% Above Pre-Pandemic Levels – and the Vaccines Remain a Leading Suspect

21

Deaths Running 26% Above Pre-Pandemic Levels – and the Vaccines Remain a Leading Suspect

27 January 2023
by Will Jones

You Can’t Make It Up

26 January 2023
by Noah Carl

Alps Were Up to 7°C Warmer in the Recent Past, Dramatic New Evidence Shows

26 January 2023
by Chris Morrison

The Disastrous Covid Vaccines Risk Tarring All Vaccines With the Same Brush

26 January 2023
by Dr Angus Dalgleish

How Much Is Britain Spending on Energy Subsidies?

25 January 2023
by Philip Pilkington

POSTS BY DATE

June 2022
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
27282930  
« May   Jul »

SOCIAL LINKS

Free Speech Union
  • Home
  • About us
  • Donate
  • Privacy Policy

Facebook

Twitter

Instagram

RSS

Subscribe to our newsletter

© Skeptics Ltd.

No Result
View All Result
  • Articles
  • About
  • Archive
    • ARCHIVE
    • NEWS ROUND-UPS
  • Forum
  • Donate
  • Newsletter

© Skeptics Ltd.

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Please note: To be able to comment on our articles you'll need to be a registered donor

Already have an account?
Please click here to login Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
wpDiscuz
You are going to send email to

Move Comment