- U.S. energy exports are booming when domestic gasoline and diesel prices are at or near their peaks.
- Most recently, India has introduced export restrictions for wheat, Indonesia for palm oil and Malaysia for chickens.
- Also, most U.S. refinery capacity is not geared to handle light, sweet blends now produced in the U.S. That necessitates exports.
Crude exports reached an all-time high in January-May, while refined product exports returned to pre-COVID levels as reported by American Shipper
Resource nationalism
U.S. energy exports are booming at the very time domestic gasoline and diesel prices are at or near their peaks.
With America’s fuel prices expected to rise even further, the “resource nationalism” debate — should we be exporting commodities we need? —
According to new tanker cargo volume data from Kpler, U.S. crude exports averaged 3.13 million barrels/day (b/d) in January-May.
Exports of clean petroleum products — including diesel and gasoline in such high demand domestically — averaged 2.32 million b/d.
That’s the best first five months since 2019, pre-COVID.
Where are US exports going?
Given Monday’s EU decision to ban tanker imports of Russian crude and products, U.S. crude and products exported to Europe are expected to rise.
A portion of the U.S. Strategic Petroleum Reserve release is already heading to Europe.
Crude flows to Europe “have definitely picked up,” said I’Anson.
“This has come at the expense of barrels into India, Canada and South Korea.”
According to Kpler data, Latin America accounted for 2.15 million b/d, or 87%, of all U.S. seaborne imports to any destination in May. “It is still possible that trade flows shift with more U.S. products heading to Europe,” said I’Anson.
Resource nationalism grows
Europe’s war-heightened demand for U.S. petroleum combined with America’s COVID-reduced refining capacity might lead some to ask: Why not curb exports and keep the oil in America?
Resource nationalism is on the rise globally.
Most recently, India has introduced export restrictions for wheat, Indonesia for palm oil and Malaysia for chickens.
“Last week, Energy Secretary Jennifer Granholm was asked whether U.S. oil export restrictions were a possibility.
Because if not, we think it represents significant unawareness regarding the very sector being overseen.”
A resultant drop in U.S. oil drilling would cause “a sharp fall in natural gas production … very likely leading to limiting LNG [liquefied natural gas] exports at the very time the world needs the gas more than ever.”
Potential fallout
The U.S. banned crude exports to countries other than Canada between 1975 and the end of 2015.
At that time, IHS Markit, now a part of S&P Global (NYS: SPGI), warned about what would happen if the export ban was reinstated.
The price of U.S. gasoline is connected to global crude and gasoline prices, not the price of domestically produced crude, argued IHS Markit.
The net effect would be “upward pressure on U.S. gasoline prices.”
The market dynamics that lead to higher gasoline prices from a crude oil ban described in our media release of November … would continue to apply but in an amplified way given today’s extraordinarily tight oil markets.
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Source: American Shipper
