Diesel Prices (CONT’D FROM PAGE 1)
Capping Production Given the popularity of diesel, one would expect refin- eries to pump out as much product as possible. But that’s not the case. As noted above, it behooves some countries to reduce output to bolster the price tag of an important export. Furthermore, there is a cost problem to consider: If pump prices drop too low, making the fuel is just not feasible.
“Over the years, refiners in the United States have re- duced capacity due to poor margins and increased en- vironmental costs, as well as to the expense required to maintain facilities in a world where United States demand has peaked,” said Andrew M. Lipow, President of Hous- ton-based Lipow Oil Associates. “Refineries are shutting down as they look ahead to how much money they will have to spend to maintain safe and environmentally com- pliant facilities.” Inflation, too, increases building costs. It can cost sever- al hundred million dollars to bring a new refinery online, at a time when oil demand in the US is going down. (USEIA, the United States Energy Information Agency, projects die- sel consumption to be flat in 2024). The prudent decision may well be to shut down, and Lipow noted that two more U.S. refineries on the West Coast and Gulf Coast are plan- ning to do just that. Supply Relief Russia produces some 10 percent of the oil from which the world refines diesel, and its ability to move its product through alternative channels has helped mitigate the glob- al diesel shortage. “The sanctions imposed by the European Union and the United States and other countries on the purchase of Russian crude oil and refined products has forced Russia to find new customers,” said Lipow. “While the majority of their oil is sold into China and India, they have found alter- native markets in North Africa and Brazil.” Too, there is a bit of supply relief from some new refin- eries in parts of the world where diesel demand is growing. “Over the past year, new refineries have come on stream in Kuwait, Oman and China,” said Lipow. “There is one in Nigeria that has yet to come online,
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