Gas and diesel prices expected to increase as crack spread soars
01/27/2023 // Belle Carter // Views

The crack spread, which refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it, soared to a three-month high $42.41 Tuesday, January 24. An analysis of Refinitiv Eikon data showed that the five-year January average was only $15.56.

This indicates that the country is facing a shortage of already-tight fuel supplies, which could lead to more expensive gasoline and diesel in the market.

The industry measures refining margins using a rough calculation called the "3-2-1 crack spread." For every three barrels of crude oil the refinery processes, it makes two barrels of gasoline and one barrel of distillates like diesel and jet fuel.

"High spreads indicate gasoline, diesel, jet fuel and other petroleum products are in short supply, while low spreads mean an abundance of supply. Spread direction is also important – if rising, it would mean fuel inventories are declining," Tyler Durden of ZeroHedge wrote.

Reuters article emphasized how this could further impact fuel supply scarcity.

"A diesel-producing unit at PBF Energy's Chalmette, Louisiana refinery was shut following a fire on Saturday. It could be out for at least a month. Exxon Mobil said Monday it will perform planned maintenance on several units at its Baytown, Texas, petrochemical complex," Reuters reported.

The maintenance season could be much lengthier than usual, with many U.S. Gulf Coast refineries still running below capacity after winter storm Elliott damaged about 1.5 million barrels per day of refining capacity in December. A Suncor refinery in Commerce City, Colorado, has also remained offline since the storm.

Brighteon.TV

Moreover, in spring, refinery overhauls doubled in number and many of these maintenance activities were postponed due to the Wuhan coronavirus (COVID-19) pandemic. Some are due to record-high margins driving increased profitability for oil companies. All outages and planned overhauls are going to make it difficult for refiners to catch up with demand as inventories are relative to historical levels.

"If we aren't hearing the alarm bells, it's because we're deaf after refining margins reached eye-watering levels in 2022 when the 3-2-1 crack spread briefly surged above $60. But from a historical perspective, current margins are sky-high, as well," Bloomberg Opinion's Javier Blas said.

Government allocates $118m to accelerate biofuel production

Amid the tightening fossil fuel supply, President Joe Biden and his administration are "seamlessly" and quietly promoting the acceleration of domestic biofuel production.

According to the Department of Energy (DOE) website, the government is allocating $118 million in funding for 17 projects that would accelerate the production of sustainable biofuels needed for transportation and manufacturing purposes.

The selected projects, which are located at universities and private companies, will drive the domestic production of biofuels and bioproducts by catalyzing biorefinery development to create sustainable fuels that reduce fossil fuels emissions. (Related: Biden's chaotic, anti-fossil fuel policies are threatening global energy security.)

The statement further indicated that the move supports Biden's goals to deliver an equitable, clean energy future that would put the U.S. on a path to achieve net-zero emissions by no later than 2050. Also, projects selected as part of this funding opportunity will contribute to meeting DOE's goal to achieve cost-competitive biofuels and at least a 70 percent reduction in greenhouse gas emissions by 2030.

"Biofuels are a versatile tool because they have the immediate potential to power our ships, trains, airlines, and heavy-duty vehicles – a huge contributor to total carbon emissions – with a significantly reduced carbon footprint," Energy Secretary Jennifer M. Granholm said. She added that the DOE investments are helping to build out a domestic bioenergy supply chain that increases America's energy independence, creates jobs and accelerates the adoption of cleaner fuels for transportation needs.

Follow FuelSupply.news for updates on the already tight fuel supply in the United States.

Watch the video below that talks about the fed emergency declared in eight states due to major gas and diesel shortages.

This video is from the Ezekiel34 channel on Brighteon.com.

More related stories:

Warning: Nearly 25% of Americans are facing risk of power blackouts this winter, thanks to Biden admin's anti-fossil fuel policies.

Americans should expect higher diesel prices, lower supply as winter nears.

America's diesel fuel shortage could CRIPPLE the supply chain by Thanksgiving.

Nebraska and South Dakota both declare fuel supply emergencies amid escalating energy crisis.

Sources include:

ZeroHedge.com

Reuters.com

Energy.gov

Brighteon.com



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