June 27

6/27 - The Biden administration (and the country) need lower gasoline prices. Unfortunately, you can’t accomplish that when you condemn oil producers and the Saudis on one hand, and then ask them to invest in expanding output on the other. Even so, drilling/production right now are secondary to the need for additional refineries. Last week, the Energy Information Assoc reported that U.S. refining capacity is down 1.03M barrels per day (bpd), or 5.4%, from its pre-Covid peak in 2019. The Aug 2021 destruction of Phillips 66’s 255,600 bpd Louisiana refinery by Hurricane Ida accounted for a big chunk of the drop. U.S. refineries are currently running at a near-record-high 94% of capacity. It won’t take much of a supply-side disruption to create shortages. Gas tax holidays might be good political theater, but they really just encourage consumption and compound the supply problem.