MUFG Bank Warns The Global Refining Crisis Is "More Than Just A Temporary Phenomenon"

Refining crude oil is a major step in the energy supply chain that heavily impacts the price consumers pay at gas stations. The US refines nearly 20% of global crude oil, accounting for more than 18 million barrels per day (bdp). However, in the last three years, under the Biden administration's unprecedented and bizarre aggressiveness toward the US E&P sector, refining capacity has decreased markedly, straining domestic and international supplies of refined crude products, such as gasoline and diesel. 

"There's no large SPR for products, no OPEC + of refining, nor a short-cycle solution such as US shale. Additionally, with peak refining demand on the horizon, there's no incentive to build long-cycle capacity," Ehsan Khoman, Head of Commodities, ESG and EM Research at MUFG Bank, wrote in a note to clients on Thursday. 

Khoman said, "A consequence is that tapping additional crude supply or reducing taxes will provide limited relief to consumers."