Refining margins… The Economist

The Economist has a nice piece explaining why refining margins are soaring, (I didn’t see price gouging on the list)… here…

“Three factors explain why refining is in the limelight. The first is a long-term decline in investment in advanced economies. With oil demand in the rich world forecast to plunge over the next two decades, investors are unwilling to spend many billions of dollars on facilities that could become stranded assets. Adding to this is environmental pressure on refining, which is seen as especially dirty, and regulations in California and Europe that favour greener fuels. Outside China and the Middle East, where capacity is expanding, refining capacity has plunged by some 3m barrels per day (bpd) since the start of the pandemic, reckons Alan Gelder of Wood Mackenzie, an energy consultancy.
The second factor that has roiled the refining business is Chinese policymaking. China has historically been a net exporter of refined products, sending large volumes to other Asian countries. In an attempt to fight local pollution and help meet climate targets, however, officials have cut export quotas for big refiners of gasoline, jet fuel and other products by more than 50% this year. On official plans, China is set to stop exporting most carbon-intensive refined products altogether by 2025. The perverse result is that it is sitting on roughly 7% of global spare capacity even as the rest of the world thirsts for transport fuels.
The third big disruptive force is, of course, Russia’s war in Ukraine and the resulting sanctions imposed on its exports of hydrocarbons. America and Britain have banned purchases of Russian oil; the eu has announced a partial embargo on crude imports, including one on refined products later this year. The effect of all this is not clear-cut. By widespread accounts (including from tanker-tracking experts), Russia is now exporting more crude oil than it did before the war. It is selling lots of cut-rate crude to India in particular, which is importing over 700,000 barrels a day more than it did before the invasion.