Refining Crunch Drives Energy Prices Higher

Tom Kloza, an oil industry analyst, believes that the current energy market squeeze is not due to a shortage of crude oil but rather a lack of refining capacity. Speaking at the American Coalition for Ethanol annual conference, Kloza argued that damaged refineries in Russia, the Persian Gulf, and the Red Sea are a major issue, comparable to the introduction of the Gatling gun.

Kloza pointed out that many observers focus on the Strait of Hormuz while overlooking this broader problem. He noted that crude oil prices have been moderate over the past 25 years, averaging around current levels. However, gasoline and diesel prices are significantly higher, with gasoline costing $140 ex-tax worldwide and diesel fetching about $180.

Kloza also mentioned China as a wild card in the market, citing its increasing electric vehicle sales and reduced crude imports from 11.5-12 million barrels per day to around 8-8.5 million. This has muted strength in crude prices while leaving product markets tight.