CERAWeek: Refiners remain competitive even if crude export ban lifted

Refiners have benefitted from the crude collapse by buying up cheap oil and transforming it into higher-priced gasoline, diesel and other refined products, an executive with the world’s largest independent refinery said Monday.

But another benefit is lurking around the corner. As the global oil glut pulls down gasoline prices to their lowest levels in years, fuel demand is expected to increase, adding yet another boost to refiners’ bottom lines, Anthony Rouse, vice president of market analysis at Valero said on the second day of a weeklong IHS Energy CERAWeek conference.

U.S. drivers on average will pay $1 per gallon less for gasoline this year than they did last year and those savings could spur more consumption, particularly as drivers opt to buy SUVs and trucks, which guzzle more gasoline than cars, Rouse said during a discussion about the effects of low oil prices on downstream companies.

Still, cheaper crude only means cheaper gasoline in the United States, where oil  and fuel prices are more closely linked than they are in Europe and Asia, said Kurt Barrow, vice president of downstream research and consulting at IHS.

“We do see some price demand response … as a result of lower oil prices, but it’s muted and primarily in the North American market,” he said.

With falling oil prices dissuaded U.S. oil companies from selling their crude, the nation’s storage tanks have been filling up, intensifying the call for the lawmakers to lift a decades-old ban on exporting crude overseas. U.S. refiners have fought back against that ban, arguing that they have the capability to process the glut of domestic oil, but Barrow and Rouse said that the U.S. refining system remains strong even if the policy were changed.

“We think the U.S. Gulf Coast refiners, the midcontinent refiners, will continue to competitive regardless of the environment in terms of crude exports,” Rouse said.

That’s because U.S. refiners also have access to cheap natural gas, which they use to power their facilities, giving them a strong cost advantage over their global counterparts, Rouse said. Valero’s refineries have a $1 per barrel advantage over similar facilities in the United Kingdom and an even greater advantage than the Asian refineries, Rouse said.