Very low inventories of oil products in the United States and a shortage of refining capacity have laid the foundations for an oil shortage crisis in the United States this summer, Paul Sankey, Lead Analyst at Sankey Research, told CNBC in an interview on Thursday.
“I just don’t think there’s anything the Administration can do about it,” Sankey said, referring to the fact that a refinery cannot be built in time to ease the gasoline and diesel crunch.
Asked about what would happen if an operating refinery were to stop production because of an accident or a hurricane, Sankey said, “we’re on the verge of a U.S. oil crisis as it is, obviously what I’m talking about is shortages.”
“We’ve never seen inventories this low, particularly in the northeast. We haven’t seen gasoline this low at this time of year in history,” the analyst added.
With the hurricane season later in the year, “We might have a crisis this summer, I’m telling you,” Sankey said.
There is a global shortage of refining capacity, and currently the energy world “is completely insane”, he noted.
Earlier this month, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said that insufficient investment in global refining capacity is one of the key drivers of the global rally in gasoline, diesel, and jet fuel prices.
There isn’t a quick fix for all-time high fuel prices in America— or elsewhere — analysts say. The quickest fix is not one that American consumers would want — a recession that would lead to job losses.
Some 1 million barrels per day (bpd) of refinery capacity in America has been shut permanently since the start of the pandemic. In the U.S., operable refinery capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data. Rising demand since economies reopened and people returned to travel, combined with lower refining capacity and very tight distillate markets have drawn down U.S. product inventories to below seasonal averages and at multi-year lows, with record-low inventories reported on the East Coast. Oilprice.com