Analysis: U.S. Fuel Supply Resilient Despite Price Jump


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- On Monday, a gallon of regular retail gasoline in the U.S. 
averaged $3.478, up from $2.997 last week and $2.902 last month. Diesel prices 
at the pump shot up even more, jumping 24% in just one week to $4.656 gallon. 
So far, retail fuel prices have been lifted by soaring oil and product futures 
caused by supply outages from the U.S.-Israeli war on Iran. Domestic refiners' 
physical crude and feedstock supplies have so far been unaffected, but a 
prolonged closure of the Strait of Hormuz will have consequences beyond the 
initial price spike -- even if a repeat of the energy crisis of the 1970s is 
unlikely.

   U.S. refiners have over the past two decades weaned themselves off their 
dependence of Middle Eastern oil. Total petroleum imports from the Persian Gulf 
fell to their lowest since 1985 last year, averaging 676,000 bpd, most of which 
was crude oil from Saudi Arabia and Iraq. The shale boom since the mid-2010s 
saw domestic grades replace an ever-larger share of imported crude, and new 
pipelines transporting heavy sour crude oil from Canada directly to U.S. 
refiners pushed out expensive tanker deliveries from Mexico, Venezuela and the 
Persian Gulf. In fact, while the share of crude from foreign origin has been 
stable over the last few years, hovering around 38%, U.S. refiners' reliance on 
tankers has still dropped markedly. In 2024, the last full year with available 
EIA data, crude imported via tanker accounted for 15% of domestic refiners' 
diet, compared to 27% just a decade earlier.

   Domestic fuel supply is far less vulnerable because of this. In addition, 
the U.S. has some 415 million bbl in strategic stockpiles, mostly in the form 
of heavier sour grades which can plug the import gap. While the SPR has shrunk 
considerably since the 2010s, so have crude imports from the Middle East -- 
reserves are thus still representing more than two years' worth of imports from 
the region.

   U.S. refiners' changed crude diet and their reduced exposure to a tanker 
market which over the past ten days saw a blowout in charter rates puts them in 
a better position compared to international peers, but doesn't render them 
immune to soaring costs on a global market. Prices at the pump will continue to 
rise for as long as the crisis lasts as the U.S. is heading towards peak summer 
demand season -- or until fuel demand takes a hit as driving becomes 
cost-prohibitive to many consumers.




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