April 24, 2019 EIA Data Analysis

Crude Oil Capacity and Utilization Rates.

EIA data reported on April 24, 2019 for the week ending April 19 shows total operable crude still capacity of 18.76 million barrels per day (MMBD). The weighted utilization rate for US refineries was 90 percent, with California refineries operating at 80.7 percent operable capacity. Although the news media reports that refinery outages are the cause of rapidly rising gasoline prices in California, there is no evidence that the two outages, one at Valero in Benicia, and the other at Phillips 66 in Carson, would be significant enough to restrain the supply of gasoline because other major California refineries are operating normally and have plenty of capacity to fill any shortfalls. It seems more likely that the media fell prey to uninformed of fake sources of information. For instance, some media reports included refinery shutdowns in the Gulf Coast region as contributing to a West Coast shortfall. That scenario is impossible since gasoline products are not moved from the Gulf Coast to the West Coast because there are no pipelines and shipping or trucking would be too expensive. The West Coast is a closed refining market, supplied only by PADD 5 (West Coast) refineries. 

There was also speculation that the floods may have caused a shortage of ethanol just at the time that refiners are switching to Spring blends for gasoline. Again, the data reveals no shortage. And, California has been producing its own ethanol in the Central Valley.

Overall, Crude oil inventories in the US increased 5.3 million barrels (MMB) from 455.1 to 460.4 MMB. This total of 460.4 MMB falls slightly above the midpoint of the 5 year range for crude oil inventories. All regions have sufficient capacity to store additional crude oil, so there is no pressure to process crude oil, which makes it easier for refiners to manage product output to match demand, or to draw down inventories of refined products.

Gasoline Supply

Gasoline stocks are sufficient to meet demand in all regions (PADDs I-V). Stocks are at the low end of 5 year range in PADD 5 (West Coast), primarily because refiners would be drawing down winter blends to fill tanks finished tanks with summer blends. This situation should be temporary.  As mentioned above, there is not evidence to support a supply-induced price increase for gasoline.

In fact, crude oil prices are still below the crude oil prices last summer, yet gasoline prices are already at last summer’s highest levels. There appears to be an effort to push gasoline prices further ahead of crude oil prices this Spring. If the strategy holds, refiners’ profits will see a healthy increase.

It is possible that Valero and Phillips will bring their refineries back on line and produce gasoline at reduced prices to pull back their market shares.  Historically, decreased consumer demand for gasoline in response to high prices could cause refinery stock tanks to fill faster than product was sold, pressuring refiners to reduce product prices to increase sales) or to reduce refining rates . Unfortunately for the consumers this year, there is plenty of room in refinery gasoline stock tanks, which will allow refiners to hold product while maintaining pricing. The next few week’s data should reveal how this situation will play out over Summer 2019.

More data and charts can be found at this link:  Energy Information Administration