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Global Refiners Struggle To Meet Fuel Demand

Global refiners are facing challenges to meet the demand for fuels like diesel and gasoline worldwide, which has increased prices and worsened shortages in big countries like the U.S. and small ones like Sri Lanka. 

Although global demand for fuel has reversed to the levels before the Covid-19, things like closures due to pandemic, Russian sanctions, along with export limits in China have caused problems for meeting demand throughout the world. China and Russia are among the largest refining countries, preceded by the United States. They are all under peak processing levels and the efforts by world governments have been fruitless to reduce prices by releasing crude from oil reserves.  

Following the pandemic closures, fuel margins were disappointing two years ago. Even though the situation has rebounded, the burden could continue in the next few years, with high prices.

According to Ravi Ramdas, managing director of energy consultancy Peninsula Energy, global oil demand was not expected to drop for a long time after the pandemic; however, there was a huge amount of refining capacity, which was reduced permanently.

In 2021, refining capacity worldwide dropped by 730,000 barrels per day (bpd), the first reduction within 30 years, said the International Energy Agency. Daily processed barrels tumbled to 78 million bpd in the month of April, under the average 82.1 million bpd before the outbreak.

For seven consecutive quarters, fuel stocks have seen a drop. The crude oil price is over 51% this year, with the U.S. heating oil futures up 71%. Recent margins for gasoline refining in Europe beat a record at $40 per barrel.

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By Saha on June 1, 2022

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