Fuel exports up, and so is the cost at the pump

By DAVID R. BAKER, SAN FRANCISCO CHRONICLE

Faced with sluggish sales at home, American refineries are shipping their gasoline, diesel and other petroleum products abroad in record amounts, turning the country into a net exporter of fuel.

And that’s one of the reasons why gasoline now costs more than ever for this time of year.

The United States, long the world’s most voracious consumer of fuel, still imports almost half of its crude oil, the raw material for gasoline and diesel. But starting in 2008, the country began exporting more refined petroleum products than it imported. And the gap keeps growing.

In the first nine months of this year, the United States exported 655 million barrels of finished petroleum products, including 121 million barrels of gasoline, while importing 264 million barrels of finished petroleum products, including 32 million barrels of gasoline, according to the U.S. Energy Information Administration.

The recession and tepid recovery have tempered America’s thirst for gasoline at the same time drivers are turning toward more efficient cars. So refiners have sought eager markets elsewhere. The fuel exports, in turn, help prop up gasoline prices here.

“Instead of that product backing up and depressing prices, it’s being sent to other countries,” said Tom Kloza, chief oil analyst at the Oil Price Information Service. “It’s good news for the refining industries and their workers and the balance of trade and U.S. jobs.”

But Kloza predicts the exports may turn into a hot-button issue next year if gasoline prices increase.

The exports are not the main reason gasoline prices are so high.

So far this year, the price of crude oil on the New York Mercantile Exchange has averaged $95 per barrel, closing Friday at $100.96. Prices have been even higher in Europe. As a result, gasoline prices can’t fall far, even though domestic gasoline use peaked in 2007 and has remained relatively weak ever since.

A gallon of regular now averages $3.29 nationwide, according to AAA. A year ago, the average was $2.88. In Houston today, it was $3.08 a gallon. A year ago, it was $2.74.

Gasoline demand in the United States likely will increase when the recovery gains firmer footing. But it may not rise to previous levels. Federal fuel-efficiency standards for cars are increasing, and with gasoline prices still high, consumers may be reluctant to drive more.

“It’s going to be difficult to get back to a point where we see … year after year of gasoline demand growth around 2 percent, like we had before,” said Gordon Schremp, senior analyst for the California Energy Commission. “That dynamic, we believe, has changed.”

Irony for U.S. drivers

Demand for diesel and gasoline remains strong outside the United States. Mexico lacks enough refineries to supply its growing population, analysts say. And the economic downturn that started in 2007 didn’t hit South America as hard as the United States.

To some oil industry critics, the exports look like a deliberate effort to squeeze American drivers.

“It’s a way to keep prices up,” Judy Dugan, research director with the Consumer Watchdog nonprofit group, said of shipping fuel abroad. “Overseas consumers are benefiting at a cost to domestic consumers.”

Oil industry representatives bristle at that notion.

“That’s just complete rubbish,” said John Felmy, chief economist with the American Petroleum Institute lobbying group. The exports, he said, help keep U.S. refineries afloat despite shriveling profit margins in recent years.

The situation contains a cruel irony for American drivers: U.S. crude oil production has risen in the last two years, while domestic gasoline sales have fallen. And yet, gasoline prices remain stubbornly high.

The reason, analysts say, is that fuel is now part of a global market, flowing wherever prices are best.

“If the price in Europe is a dollar more per gallon, pre-tax, than what the United States is paying, and shipping is 50 cents, why in the world would I supply the United States?” said James Beck, lead analyst for the Energy Information Administration’s weekly petroleum supply team.

15 Comments

  1. rts

    It’s all a fraud. Has nothing to do with American supply and demand. We can conserve all we want, they will sell all we save to other countries to keep the price up.

    #1
  2. el diablo

    So what’s the alternative? Force them to sell here at lower prices? That’s always been my question to the Drill Here Pay Less proponents.

    #2
  3. Paul

    “If the price in Europe is a dollar more per gallon, pre-tax, than what the United States is paying, and shipping is 50 cents, why in the world would I supply the United States?”

    Because you care more about money than people?

    #3
  4. ntangle

    “It’s good news for the refining industries and their workers and the balance of trade and U.S. jobs.”
    ——————
    I don’t blame the refiners…I’d be doing the same thing, rather than having some valuable assets & talent go underutilized. But I doubt that it helps the trade balance much. Since the US is a net crude importer, it will need to import more crude for these exports. The only positive effect on it will be the value added (their refining margin).

    #4
  5. Bubba

    Our dollar aint worth crap, that is the problem. We’ve printed way more dollars than we have cut our fuel consumption. Duh!!

    #5
  6. Here is another area this administration has failed. The government should put a tax on the oil companies that for shipping this product out of the country.

    #6
  7. Dollar

    To say we are a net exporter of refined product, is really not saying much, in that we do not import a lot of refined product.

    Refiners spent a lot of money several years ago to increase capacity after Katrina. Evidently, they now need to use that new capacity.

    And the fact remains that we still import much of our oil and most refiners are not paying WTI price for crude, they are having to pay the global price of Brent.

    #7
  8. georgex

    Looks like a very positive report with domestic crude production up over two years, increasing exports helping trade balance, more efficient cars, and domestic gasoline usage not growing.

    #8
  9. Dan

    Only in the anti-Houston Houston Chronicle would there be a report that sees exports of refined oil products as negative. Gasoline and diesel, like oil, are priced globally, not locally. The refiners on the east coast are shutting down due pricing and imports but the other refiners are still competitive enough to export (maybe due to the spread between WTI and Brent, but that creates jobs also). This report is like saying it would be awful for the american automotive industry to be competitive enough to export cars (not going to happen with the UAW). All those good paying jobs are just terrible! What a bunch of rubbish!

    #9
  10. T.C.

    The exportation of key refined products should be allowed. However there should be a export tax assessed that would go into the highway transportation fund or infratstruture funds (bridge, airports,etc) Each area requires much needed funding. Many would prefer keeping all refined products in the country but refiners will scream at losses and low margins. A compromise is allowing export while recoverable fees for the suggested funds. This tax/fee impacts the “buyer” who are outside US borders. If US economy would heat up too quickly there should be “triggers” for either raising the fee levels or restricting the exports. Retaining more products stateside will slow the rising prices.

    #10
  11. David

    Awesome! We need a lot more of this in America. So when is Apple going to start manufacturing all their IThings in America and exporting them to other countries? Oh that’s right. Never.

    #11
  12. Wakeup!

    America had better get used to the third-world country it’s become. This is all part of the “global economy” our sacred politicians have espoused for decades! The sad truth is it’s backfired miserably. Minimum wage jobs at fast-food chains and in retail selling Chinese goods and giving the masses credit cards and mortgages for homes they don’t have a prayer paying for. Vote America! Vote!

    #12
  13. Trail Tramp

    The US should stop all exports of corn. I’m having to pay too much for my Orville Redenbacher microwave popcorn.

    #13
  14. Seth Neff

    We might wish to note that the price for Texas crude oil is WAY below the world price for identical oil.

    So, Texas oil producers are selling cheap, and Texas refineries are buying … cheap.

    So the rest of the world is buying gasoline and diesel from the Texas refineries.

    Normally, we would expect supply and demand to narrow the price gap for Texas crude oil producers. But we are not holding our breath in the present ‘command’ economy.

    #14
  15. tanstaafl

    The exports amount to slightly less than 10% of U.S. gasoline consumption. If the government would end the ethanol subsidy then these gasoline exports would disappear.

    #15