News
30/03/26
War effects ripple into product markets
Houston, 30 March (Argus) — The ripple effects of the Middle East crisis will
continue to spread in oil products markets, executives at a major energy
conference in Houston have warned. Jet fuel has already been affected, diesel
will come next and then gasoline, just as the northern hemisphere summer driving
season begins, Shell chief executive Wael Sawan told the CERAWeek by S&P Global
conference in Houston on 24 March. "South Asia was first to get the brunt,"
Sawan says. "That has moved to southeast Asia, northeast Asia and then more so
to Europe as we get into April." The effective closure of the strait of Hormuz
due to the US/Israel-Iran war poses a systemic risk the longer it lasts,
TotalEnergies chief executive Patrick Pouyanne says. Disruptions are worse on
the products side, given an estimated 4mn-5mn b/d that has been left stranded by
the waterway's closure, Pouyanne says. This has been aggravated by China's
decision to ban exports from its refineries. "We can manage the situation," he
says. "We have inventories up to three, four months. Beyond, it will be more
systemic." The situation is particularly acute in southeast Asia, where nations
are growing increasingly concerned about the likely impact on economic growth
from soaring fuel costs. "That is why most of these countries are calling
leaders, in particular US leaders, to try to find a solution," Pouyanne says.
The administration of US president Donald Trump is taking action to relieve
rising domestic fuel prices that have surged since the start of the war. The US
Environmental Protection Agency (EPA) will allow refiners and retailers to blend
more ethanol into gasoline than is usually allowed in some states, starting in
May, and will waive other fuel rules. The agency issued emergency waivers on 25
March allowing continued nationwide sales of gasoline with up to 15pc ethanol
(E15), administrator Lee Zeldin told the conference. The typically cheaper blend
would have otherwise been restricted in much of the US during the summer because
of rules to limit smog that do not apply to typical E10 gasoline. The EPA is
also suspending federal enforcement of requirements for other US regions to
switch to low-volatility "boutique" gasoline fuel blends this summer. California
and major metro areas, such as Denver, make the switch each year as part of
federally approved plans to comply with national air quality standards. It will
be up to states and local jurisdictions to decide whether to maintain those
specific standards, the agency says. Approaching $4/USG US retail gasoline
prices rose by nearly 25¢/USG to average just under $4/USG in the week to 23
March, the highest in eight months, Energy Information Administration data show.
West coast gasoline and diesel prices rose above $5/USG and $6/USG,
respectively. The energy department has been closely monitoring fuel markets for
supply disruptions that could create extreme and unusual conditions, Zeldin
says. "We foresee potential for a disruption to the American fuel supply," he
says. The emergency fuel waiver will last until 20 May, the maximum duration the
Clean Air Act allows. The EPA will be ready to extend the emergency fuel waivers
as ongoing issues continue to present the need for action, Zeldin says. The US
administration earlier this month approved a 60-day waiver of domestic shipping
requirements under the Jones Act in another attempt to ease the spike in
commodity prices. The temporary waiver — which the White House says is to
mitigate "short-term disruptions" to oil markets caused by the Middle East war —
allows shippers to transport crude, natural gas, natural gas liquids,
fertilizers, coal and other energy-related products from one US port to another
without using US-built, US-crewed and US-flagged ships, as the 1920 Jones Act
requires. By Eunice Bridges and Stephen Cunningham Send comments and request
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