U.S. refiners are in the midst of a surprise export boom.
Normally in the summer refiners do a brisk business selling fuel close to home – revving up gasoline production for the peak driving season.
Exports Outweigh Imports
Now, for the first time in 60 years, the U.S. is exporting more fuel than it imports. “We used to be a net importer of gasoline by approximately a million barrels a day,” said Fadel Gheit, Managing Director and Senior Analyst Oil and Gas at Oppenheimer & Co. “Two years ago we not only stopped importing gasoline, we became a net exporter. We became the fastest exporter of gasoline and diesel in the world.”
Refiners ship gasoline, diesel and other fuels overseas for several reasons, including: the U.S. has new sources of cheaper shale crude, the cost of ethanol credits required for fuel sold in the U.S. is at a record high, and Latin America has limited refinery capacity.
“We’re starting from very efficient refiners, much lower cost of operation, much lower crude costs and much lower natural gas prices, said Gheit. “So, you add all these factors and that means we are very competitive in the export market. We are also seeing companies increasing their capacity to export every year. That trend will continue.”
Refiners make more money exporting fuel, so production is running at the hardest rate since 2005 and oil supplies are dropping at the fastest rate ever. And crude prices are at 16 month highs.
“The U.S. West Texas Intermediate crude oil is up 14.3 percent this year, whereas the more international Brent Crude Oil is only up 80 basis points,” said Jodie Gunzberg, Vice President of S&P Dow Jones Indices.
Exporting fuel limits gasoline at home and during the summer driving season when prices normally rise. AAA said the average price for a gallon of regular gasoline rose to $3.63 at the end of July. That is up 4.5 percent from one month ago.
Eye on Gas Prices
Congress is already taking notice of the surge in exports and gasoline prices.
At a Senate hearing last month lawmakers wanted to know why gas prices were so high at home, when there’s so much extra fuel to ship overseas.
So far, many Senators don’t like the answer.