U.S. Exporting More Gasoline, Diesel Fuel

While world crude oil prices have fallen in the last two months on concerns the economy is slowing, the retail price of gasoline and diesel fuel has remained relatively high.

Why?

A number of reasons have been offered, including weather-related problems at refineries. But there may also be another reason. U.S. refiners, it turns out, are shipping increasingly large amounts of U.S. oil products overseas.

In its latest report, the U.S. Energy Information Administration notes U.S. refiners last year shipped 656,000 barrels per day of distillate fuel, which includes heating oil and diesel fuel, overseas. During the first six months of this year, diesel fuel exports averaged 730,000 barrels per day – nearly a one-third increase over the previous year.

U.S. stockpiles of diesel fuel, according to the report, are now 11 percent below where they were a year ago.

Big increase in gasoline exports

The U.S. is also increasing its exports of refined gasoline. U.S.-based refiners are exporting 395,000 barrels per day to other countries. The government report shows those exports have almost doubled since the start of the summer, when coincidently, domestic gasoline prices started to fall.

While the U.S. is sending its own oil products abroad, it obviously has less need to import oil from other countries. Economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa., says that's one big reason the U.S. trade deficit dramatically shrank in July.

“The decline in imports was largely driven by petroleum,” Naroff said.

Removing excess inventory from the marketplace

As the economy slows, there is less demand for energy and prices should fall. But that assumes the supply isn't affected by removing excess inventory from the marketplace. Events played out a little differently in late 2008 as the world's financial system teetered on the brink of collapse.

Oil prices, which had peaked in July 2008 at $147 a barrel, went into a free-fall in October, falling to about $40 a barrel by the end of the year. Consumers saw gasoline prices dip to almost $1.50 a gallon by the end of the year. Despite new concerns the economy could fall into another recession, nothing like what happened in 2008 is happening now.

Oil refiners are private companies, free to sell their products in a global economy to the highest bidder, wherever they can find a market. But one is left to wonder what U.S. gasoline and diesel fuel prices would be if U.S. petroleum exports remained at normal levels.