Refining Bottleneck

Bloomberg reports A Crunch in Key Corner of Oil Market Leaves Consumers Vulnerable to Heat and War.

Oil demand growth has outpaced the increase in refinery capacity since 2021, and this will continue through 2027, according to industry consultant FGE. After 2028, there are no confirmed new refinery projects, it said, though there will likely be projects undertaken in Asia and the Middle East.

"The refining system is structurally tight," said Nikhil Bhandari, Goldman Sachs Group Inc's co-head of APAC natural resources and clean energy research. "That's because of the backdrop where we've had 4% to 5% of global refining capacity closing in the last five years." Global refinery processing rates this year are near record highs, according to the bank's data going back to 2006.

Plants there are already running at about 88% utilization, leaving little room for more, according to Parsley Ong, head of Asian energy and chemicals at JPMorgan Chase & Co. "Refineries are already running at the highest utilization rates in recent history."

Politicians Doing Their Job?

Here's the hoot of the day: "Politicians are doing their job to meet people's demands," said Steve Sawyer, director of refining at FGE.

Sawyer is half right, adding "But peak demand for oil may take longer than what these politicians would like."