Global Fuel Markets Tight and Inflexible, Causing Widespread Impact

7:10 AM ETDeveloping

World Desk

In Short: The global fuel market is described as tight and inflexible, leading to significant impacts on various industries and regions, from protests in the Middle East to higher costs for farmers in California.

Global fuel markets are described as tight and inflexible, with refinery capacity constrained in the Middle East due to Iranian strikes and the trickle of fuel flows through the Strait of Hormuz, according to analysts. This has led to significant impacts on various industries and regions.

In the Middle East, new fuel pricing targets consumption above 110 liters monthly, doubling the cost to 100,000 riyals per liter, sparking protests in 2019 over fuel price increases. Iran, with some of the lowest petrol prices in the world, is considering adjusting fuel subsidies to make up for lost revenues amid economic difficulties and US sanctions.

In Ukraine, a fuel attack injured 10 people, including three children, as Kyiv intensifies strikes on Russia’s oil infrastructure amid a deepening fuel crisis. The attack produced 1.2 million tons of gasoline, 1.9 million tons of diesel, and 1 million tons of fuel oil.

In California, higher fuel costs are squeezing businesses across various industries, with farm owner Jay Mahil noting a 40% increase in fuel costs from the previous year. The turmoil in the Persian Gulf is forcing cargo away from the Suez Canal and onto a longer route around the southern tip of Africa, creating longer transit times that burn more fuel and drive costs up further.

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"It's pretty, pretty tight and inflexible out there as far as the market is concerned," Hardy told the Asia Pacific Petroleum Conference by S&P Global Energy in Singapore today, referring to the fuel market.
Globally, refined product inventories are "still drawing," Hardy said, as carried by Bloomberg.
"The global refining system has little slack to make up for the disruptions we are currently seeing," ING's commodities strategists Warren Patterson and Ewa Manthey wrote in a note last week.
"We're still not running enough refining capacity to prevent those draws, and we keep eating into the surplus that exists around the world," Vitol's top executive added.
The real stress in the oil markets is in the downstream, analysts say.
The whole process relies on diesel fuel, which has grown extremely expensive in recent months, said farm owner Jay Mahil, whose family has been growing wine grapes, citrus and other crops in the Central Valley for four generations.
Though grocery costs may decrease slightly once fuel costs stabilize, they are unlikely to return to prewar baselines as retailers adjust to higher prices, Vyas noted, pointing to sustained increases in food costs post-pandemic.

Sources

Crude Oil Prices Today | OilPrice.comlink