As we enter the summer driving season, it’s timely to assess the state of U.S. motor fuels and the refining industry.
As of late April, U.S. distillate inventories stood at 34 days of supply, up from last year’s 29 days, despite previous global shortage fears due to sanctions against Russia, per the EIA. Meanwhile, U.S. gasoline days of supply sits at 26 days, up from 24 days last year. As a result, gasoline and diesel fuel prices have remained stable compared with last year, despite higher oil prices. This stability underscores the benefits of energy abundance, bolstered by robust domestic oil production and refining capabilities.
Robust domestic production prompted a shift in the quality of crude oil used in refining. In fact, so far in 2024, Gulf Coast refineries have utilized one of the highest shares of domestic crude since 1985. When U.S. light sweet crude is refined, it yields more valuable products like motor gasoline and diesel fuel compared with using denser crude inputs. This shift is made possible by domestic oil production exceeding 13 million b/d, mainly from Texas, and improves processing efficiency by aligning refinery needs with what is produced here at home, bolstering U.S. energy independence and Texas’ role in the global oil market.
The abundance of gasoline and diesel fuel production continues despite a recent demand shift toward kerosene-type jet fuel, marine fuel and petrochemical feedstocks year-to-date through early May. A combination of strong materials demand, resurgent air passenger and cargo miles and tight shipping markets has raised demand for these fuels. Global marine shipping has been impacted by ongoing geopolitical uncertainties, for example, taking longer but safer routes around the Cape of Good Hope to avoid Houthi-controlled waters in the Red Sea.
The global oil market is adapting to these uncertainties. According to data from the U.S. International Trade Commission, U.S. refined product exports from Texas grew by 11.6% year-over-year (y/y) in February. Notably, Texas’ exports of jet fuel and distillates rose by 16.1% y/y and by 17.0% y/y, respectively, reaching their highest levels for the month since 2020.
As a result, U.S. refiners have significantly added to global supply, with consumers remaining the prime beneficiaries. Americans have never driven more, with U.S. vehicle miles traveled reaching a record 3.3 trillion miles in 2023, according to the U.S. Federal Highway Association. This trend continued with growth of 2.0% y/y in February.
In addition, Americans have paid less for fuel over the past year. U.S. motor fuel prices fell by 10.3% y/y in 2023 and by another 3.3% y/y in Q1 2024, according to the Bureau of Labor Statistics.
However, despite these positive developments, federal energy policy appears out of step. As of mid-April, the White House was contemplating U.S. Strategic Petroleum Reserve (SPR) crude oil releases, even though SPR levels remain near 40-year lows. This is in addition to the EPA allowing sales of higher ethanol gasoline blends, which could effectively increase U.S. gasoline supply and exert downward pressure on fuel prices this summer.
While it’s challenging to separate politics from energy policy, the evidence is clear: market forces are effective, and U.S. oil production and refiners have continued to deliver at record levels. A significant uncertainty for U.S. energy security is short-sightedness of energy policies that have fostered this success.
As Texas Oil & Gas Association President Todd Staples has emphasized, "We cannot take for granted that this industry can continue to rewrite its record book in the face of federal policies blatantly designed to undermine progress.
Delayed permits, canceled pipeline projects, closed and delayed federal leasing programs and incoherent regulations hurt American consumers and stifle our ability to deliver energy freedom and security around the world."
This summer, enjoy the driving season, cherish America’s personal freedom of transportation and remain vigilant about energy policies that could compromise our energy security.
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