This week, AFPM joined API and industry associations representing fuel retailers, gasoline marketers, convenience stores and tank truck carriers to field questions from the media about the ongoing fuel distribution challenges resulting from the Colonial Pipeline shutdown.
The waiver to the Jones Act provided by the Department of Homeland Security is already proving helpful in the wake of Hurricanes Harvey and Irma, both of which affected important energy infrastructure...
We get it. If supply and demand are what determine gasoline prices, you would think mandatory storage of even more gasoline in California might help to keep prices lower for consumers. But it’s not that simple. In fact, mandating that refiners keep significant volumes of gasoline in inventory ALL THE TIME is a recipe to raise everyday fuel costs in the California market and potentially reduce supplies of fuel available to Arizona and Nevada. And what’s worse, there’s no evidence that having more fuel in inventory would stop the occurrence of price jumps.
Diesel inventories in the United States and around the world are low and there is growing concern about what tight supplies could mean heading into a cold winter. Below, AFPM’s industry analysts explain (1) what’s behind this particular supply chain challenge, (2) how U.S. refiners are adapting operations to meet consumer needs (i.e., running full out and maximizing distillate production) and (3) the role government might play in bringing about resolution.
Restricting exports would be a major unforced error for the President, tightening global fuel supplies, throttling U.S. fuel production and increasing costs for American consumers. Likewise, imposing product inventory requirements boils down to siphoning gasoline and diesel into storage, and away from consumers.
Oil markets are famously sensitive to uncertainty. Global conflict can send prices higher on concerns that crude oil supplies could be disrupted. This is playing out in response to Russia’s unprovoked acts of war against Ukraine. Russia is a major supplier of crude oil and other energy products globally, though less so in the United States. In recent days, many market participants have committed to stop purchasing Russian oil. Shipping companies are concerned about loading cargoes from Russia and some shippers are finding the cost associated with such cargoes too high. These moves are tightening an already tight market.
Limiting California’s access to the exact types of crude oil its facilities need will only increase prices for the state’s consumers and travelers. Drivers are already dealing with gasoline prices in excess of $5 per gallon and the highest fuel taxes of the 50 states. Confining energy producers and consumers to a smaller pool of crude oil will make a very sensitive price environment that much worse.
AFPM President & CEO Chet Thompson sent a letter House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy expressing AFPM’s opposition to H.R. 7688, the Consumer Fuel Price Gouging Prevention Act.
