Potential US refined oil product export ban would challenge already constrained global markets and refining systems

A proposed US refined product export ban would save US consumers at the gasoline pump but pose significant challenges and costs to US and global refining systems, according to a recent analysis from Wood Mackenzie.

Using its Refinery Supply Model, Wood Mackenzie estimates that a proposed US oil product ban could save US consumers $5 billion in gasoline prices. It would also increase $2 billion in distillate costs to European trading partners and erase $30 billion in earning from US refiners, while boosting earnings for refiners abroad.

“Our models show that the potential ban would save US consumers on gasoline, but any potential savings would be based on new global trade routes being established efficiently, which is not a guarantee,” said Alan Gelder, VP Refining, Chemicals & Oil at Wood Mackenzie.  “Prices could go higher if there are disruptions in this process, eroding US consumer savings. In the long-term, US refineries could see lower future investments, which threatens future US supply.”

Wood Mackenzie estimates that a US refined product export ban would create a 1.4 million barrels per day (b/d) distillate gasoline supply gap globally and would decrease US crude runs by 1.5 million b/d, primarily affecting Gulf Coast refiners. The US would still require gasoline imports to meet demand.

To fill this supply gap would require record export levels from China, Russia and the Middle East.

“There is enough global capacity to cover US exports to Europe and Latin America, but it would require extraordinary circumstances, record exports and elevated refinery utilization levels from China, Russia and the Middle East,” said Raul Calzada, Research Analyst, North America Refining Assets. Caldaza added: “Refined products from China would have to more than double their 2021 totals to fulfill European demands.”

ENDS

Editor’s note: Wood Mackenzie’s Refinery Supply Model integrates its detailed knowledge of individual refining assets over 50 kbd in capacity into a global supply model. This global supply model optimises to satisfy global/regional and country level demand at lowest total cost, reflecting the optionality of global crude and refined product trade flows, freight costs and the flexibility of the global refining network, modelled by over 650 nodes. It enables users to simulate changes in crude and or refined product trade limitations and compare the changes in refined product pricing and margins to our base case outlook (or other alternative scenarios).