U.S. Gas Exports Rise Even as Prices Soar Nationwide
In the month after Iraq invaded Kuwait, U.S. refiners exported more gasoline than in any other month in history--at the same time gasoline prices at home increased sharply, the Energy Department has reported.
That’s because gasoline prices were increasing even faster in other countries, particularly in Europe, and refiners found that they could make more money by sending gasoline overseas than by selling it here, the federal agency said.
But oil companies exported less than expected in August, and much less of it went to Europe than was previously believed, the agency said in a new analysis released Monday.
The energy agency also pointed out that the exports amounted to less than 1% of total U.S. consumption of gasoline; independent analysts said the effect on supplies and prices at home was negligible.
“Most of the major oil companies refused to (boost) exports from fear of political retribution,” said Philip K. Verleger Jr., an economist with the Institute for International Economics in Washington.
Consumer advocates criticized the increased export levels, arguing that they unduly pressured U.S. gasoline supplies and prices in a month when retail pump prices skyrocketed about 20 cents a gallon nationally.
“It was clearly opportunistic,” said Ed Rothschild, energy policy director for the consumer group Citizen Action in Washington.
Sen. Joseph I. Lieberman (D-Conn.), a vocal oil industry critic, questioned the decision to export gasoline while U.S. troops are in Saudi Arabia, in part to defend area oil supplies: “The increased exports have not affected our domestic supply, but they may, and we may well be in a war before long. In that context, we have to do everything we can to protect the security of our economy and the availability of fuel at a reasonable price.”
But industry officials defended the exports simply as a consequence of a free market. “We had plenty of supplies domestically,” said Ron Planting, a statistician with the American Petroleum Institute, the oil industry’s main trade group. “The whole thing doesn’t seem very remarkable to me.”
According to energy agency figures released late last month, U.S. oil companies exported an average of 77,000 barrels of gasoline daily in August, nearly double the amount in July and 38% higher than last August.
That’s because prices rose so much faster overseas than in America after the Aug. 2 Iraqi invasion of Kuwait. U.S. refiners, in part, heeded President Bush’s call for moderation in pricing, while Europe and Asia faced tight gasoline supplies as a result of the loss of Kuwaiti refining capacity.
By Aug. 31, Rotterdam gasoline was $1.07 a gallon, while New York spot gasoline was only 90 cents a gallon. That 17-cent-a-gallon difference exceeded the 5-cent-a-gallon cost to ship gasoline to Europe, giving refiners an incentive to export, the energy agency said Monday.
The previous record high level of exports, 60,000 barrels a day, was in July, 1989, an energy agency official said.
Despite the record exports, shipments fell below expectations in August, analysts said. Some estimates had put August exports at 100,000 to 150,000 barrels a day.
Moreover, the energy agency reported Monday that less gasoline than expected went to Europe in August--only about 8,000 barrels a day, or 11% of total exports, compared to 58% to Mexico and 18% to Canada.
Independent analysts said the increased level of exports had little effect on prices here.
Although demand for gasoline products increased in August, U.S. refineries produced 1.2% more gasoline than in July; about 220,000 barrels of gasoline were also taken out of national inventories.
“There were no supply problems in the United States . . . and exports helped to alleviate a possible shortage in other markets,” said Dennis Eklof, a senior consultant with Cambridge Energy Research Associates in Massachusetts.
The price difference between Europe and the United States has narrowed, and exports are expected to have fallen to more normal levels in September and October, the agency said. As of Oct. 26, gasoline in New York was actually 4 cents a gallon higher than in Rotterdam.
During the month, the United States remained a net importer of gasoline, although the increased difference in prices also lowered the incentive for overseas refiners to send gasoline to America. In August, U.S. imports of gasoline fell to 313,000 barrels a day from 372,000 barrels a day in July and 360,000 barrels a day in August, 1989.
GASOLINE EXPORTS SOAR U.S. oil companies exported an average of 77,000 barrels of gasoline daily in August, 38% higher than in August, 1989. The mix of importing countries has also changed.
Los Angeles Times
August 1989 Total exports: 58,000 Barrels/Day Caribbean: 3% Mexico: 23% Canada: 5% Central America: 19% South America: 9% Australia: 18% Japan: 23% August, 1990 Total exports; 77,000 Barrels/Day Caribbean: 1% Mexico: 58% Canada: 18% Central America: 12% Europe: 11% Source: U.S. Department of Energy
