Many Americans know supply and demand can make an impact on how many dollars they shell out at their local gasoline station--the lower the supply the higher the price. Is part of the reason supply is low because refiners are keeping it there deliberately while sending refined oil overseas?
Refiners have been shipping historically high amounts of refined products out of the U.S., much of which is bound for Europe or Asia. Since diesel demand is high from Europe, where a majority of vehicles burn the heavier fuel, refiners can make a few extra dollars from each barrel by shipping it across the Atlantic. Meanwhile, domestic supply of diesel fuel currently sits nearly 11 percent below where it was last year, or some 19 million barrels lower.
Certainly the fact that U.S. refiners are exporting such a high volume of product overseas is not only keeping domestic supply tighter than years past, but it's also supporting high prices. Gasoline exports are also at record highs, some 395,000 barrels per day, according to the most recent Energy Information Administration numbers. Just earlier this summer, we were exporting 200,000 barrels per day of finished gasoline, so refineries are now sending nearly double the amount of gasoline out of this country. Looking at gasoline inventories, we see a similar deficit because of the amount of gasoline being shipped out. Not surprisingly, the latest EIA numbers show gasoline inventories some 7.4 percent or nearly 17 million barrels below there year ago levels. [See a collection of political cartoons on gas prices.]
The bottom line is this: historically high exports aren't allowing U.S. domestic supply to grow and are certainly a part of the culprit behind high gasoline and diesel prices. So for those motorists out there rounding up reasons why prices are high can certainly add products being exported to their laundry list of reasons why motor fuel prices remain seasonally high. Keep in mind refinery maintenance season is right around the corner, and if these export rates remain high, we could see even more pressure on gasoline prices, perhaps pushing the fragile U.S. economy closer to the brink of another downturn.