Crude and Refined Oil Products Markets: Transient Shocks or Secular Change?
About the Project:
The ramifications of the way changing patterns of supply and demand are reshaping crude and refined product flows and the extent to which these changes represent a short-term deviation or secular change from the norm.
The global market for crude oil and refined products
is rapidly changing. The US surge of light tight oil
production resulting from hydraulic fracturing of
shale formations is one factor. But other less
publicly visible trends have equally far-reaching
consequences. Europe’s oil refining industry,
already suffering from overcapacity and its lack of
complexity, risks being squeezed by investments in
upgrading capacity in Russian refineries, additions
of new, complex refining capacity in the Middle
East, and the prospects of product flows from US
East Coast refineries. China and other parts of Asia
have also added flexible, deep conversion refineries
capable of meeting the most demanding product
specifications.
Low cost shale gas in the US is fundamentally
altering the comparative advantage of regional
petrochemical industries. Naphtha-feedstock based
plants are losing competitiveness to those based on
natural gas-derived feedstocks. Crude oil trade flows
are impacted both by the extraordinary turnaround
of US refined product exports and by expansions of
Middle East refining that may replace crude oil
exports with refined oil product exports.