Rising Refining Costs Mask Energy Sector's Real Crisis

Veteran energy analyst Jeff Currie says that while crude oil prices are rising, the real crisis in the energy sector is not being reflected. He notes that no one on Earth consumes crude oil except refineries, while everyone else buys gasoline, diesel, and jet fuel.

According to Currie, European diesel prices are nearly twice the price of Brent crude, a significant divergence from historical trends where crude oil and refined product prices were closely aligned. This makes crude a proxy for the broader energy market, but that relationship has now ended.

Currie attributes this divergence to China cutting its refining operations, which has kept crude prices low while tightening supplies of oil products. In effect, China's actions have shifted the supply shortage from crude to the refining sector.