U.S. Gasoline Withstanding a Very Rough Year

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Written by Daniel Graeber for IIR Energy Intelligence (Sugar Land, Texas)

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Summary

Refineries are getting a bit of a break after a rough start to the year. From geopolitical issues to trade barbs, the sector could nonetheless be facing pressures.

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Retail Gasoline Holding Up Against Market Volatility

With sector tests ranging from severe winter weather to geopolitical risks and trade uncertainty, U.S. retail gasoline prices are showing a certain degree of relative stability, data show.

Travel club AAA posted a national average retail price of $2.94 for a gallon of regular unleaded gasoline for Monday, compared to $3.15 at the same time last year. Refineries are getting a breather from severe winter weather, though other market factors could be adding up.

IIR Energy issued an alert to clients last week advising them that mechanical issues at the Borger refinery in Texas, operated by Phillips 66, led to an unplanned outage at one if its units. The facility, churning out around 140,000 barrels per day (BBL/d) of refined products, could be back online before the end of the week.

Once that ends, Marathon has scheduled a two-month maintenance period for work at its refinery in El Paso, Texas, with a processing capacity of 131,000 BBL/d.

Elsewhere, PADD II, which covers much of the Great Lakes region, is still recovering from higher-than-expected outages at the start of the month. Valero experienced a fire on February 9 at its 91,500-BBL/d Ardmore, Oklahoma, refinery, causing a plant-wide shutdown. Marathon shut its entire 255,000 BBL/d Catlettsburg, Kentucky, refinery February 10-13 due to a power-supply interruption by an outside provider.

California, meanwhile, is forced to import fuels from as far away as the Bahamas to address the fuel shortages triggered by refinery closures. Opening in 1969, Valero said February 16 marked the closure date of its refinery in Benicia.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Refining Database can learn more about the refineries in question--including capacities, investment values and necessary equipment--in this comprehensive list.

The market nevertheless looks well supplied. The U.S. Energy Information Administration (EIA), part of the U.S. Department of Energy, showed total motor gasoline stocks were about 3.5% above year-ago levels during the seven-day period ending February 13.

Supply, Demand Could be in Question

The total amount of refined petroleum products, a proxy for demand, sent to the market was 4.1% about year-ago levels. Meanwhile, crude oil prices, which account for the bulk of what consumers see at the pump, are expected to dip this year despite mounting geopolitical risk.

EIA analysts in their monthly market report for February said they believed West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, would fall below $50 per barrel by next year, below the point at which already-frustrated shale players can make a profit. Successive quarterly surveys from the Federal Reserve Bank of Dallas showed those in the energy sector have been frustrated with trade and economic policies from President Donald Trump, despite political support for the fossil fuels industry.

Last week, however, his trade agenda was upended by a Supreme Court ruling that found the president overstepped his authority with the reciprocal tariffs unveiled early last year. Tamas Varga, an analyst at London oil trader PVM, said in his Monday newsletter that there are too many variables to consider at this point.

"Yet, judging by the late rally in U.S. equities, it might turn out to be a blessing in disguise ahead of the midterm elections, as it could help ease the affordability crisis if it is adhered to," he wrote.

Energy was spared in the tariff row, but uncertainty still remains given the impacts on related sectors such as steel. The EIA said it expects retail gasoline prices to average $2.91 this year, down from the $3.10 per gallon average posted last year. That could change, however, given the escalating tensions between the United States and Iran.

WTI is up 16% so far this year. Trump's deadline for Iran to respond to his various demands is coming up, and should it lead to a full-scale military operation, Varga at PVM said the impact would be "profound," given the 20 million BBL/d in waterborne crude oil moving through the region.

IIR Energy reports that spring refinery maintenance has already peaked, with planned outages not expected to exceed 1 million BBL/d for the rest of the season.

By the Numbers

• $2.94 for a gallon of gas
• 20 million BBL/d at risk from U.S.-Iran conflict
• 1 million BBL/d maintenance unlikely this year

Key Takeaways

• No critical issues with gasoline sector
• Geopolitical issues could create headwinds
• Spring refinery maintenance has peaked

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).