Texas declares diesel emergency despite pumping 5.7 million barrels a day
Texas produces 5.7 million barrels of oil a day, 40% of US crude, yet has declared a diesel shortage emergency. The problem is not the well, it's the…
English · Original discussion in Spanish · Published
Texas pumps 5.7 million barrels a day and still runs short of diesel
Texas pumps 5.7 million barrels of oil every day, nearly 40% of all US crude. Enough, on paper, to cover Spain's demand three times over. And yet Governor Greg Abbott has just declared a state of emergency over diesel shortages and record prices. The paradox is no paradox at all: the crude that comes out of Texas is light, ideal for gasoline, but Gulf Coast refineries have been configured for decades to process heavy Venezuelan or Mexican crude. The bottleneck is not at the well, it's at the refinery.
Why so much oil doesn't prevent a diesel shortage
The light crude Texas produces is cheap and perfect for making gasoline, but refining large volumes of diesel and aviation fuel calls for heavier crude. US refineries cannot process just any type of oil, and converting a plant to a different diet means billions of dollars and years of permits. On top of that, diesel is sold on a global market where price is set by worldwide supply and demand: some of the diesel refined on the Gulf of Mexico goes to the highest bidder. Hence the temptation to ban exports, a measure that would lower prices in the short term but create imbalances between regions.
Abbott's measures: dyed diesel and less sulfur
The emergency declaration, in force for 30 days and renewable, lifts restrictions on commercial transport. Texas now allows dyed diesel —chemically identical to regular diesel but tax-exempt and reserved for agricultural machinery— to be used on state roads, suspends low-emission rules and raises the maximum weight allowed for fuel, agricultural and timber loads. Abbott has also asked the EPA to waive the ultra-low sulfur diesel requirement. "Texas agriculture and freight transport depend on diesel," he argued. The average price in the state: $5.86 per gallon, about €1.40 per liter.
The global price and the Texas paradox
Diesel has surged due to global factors: Ukrainian drone attacks on Russian refineries, disruptions at Middle East facilities and problems crossing the Strait of Hormuz. It is estimated that between 4 and 6 million fewer barrels of refined products are being produced worldwide each month. In Texas, where people are used to paying very little for fuel, the spike has set off alarm bells. For many residents it is incomprehensible that, producing so much crude, they should pay such high prices. The crisis is not one of oil, it's one of refineries.
How long can a patchwork of burning dirtier fuel and running dyed diesel on the highways hold up?
Texas pumps 5.7 million barrels of oil every day, nearly 40% of all US crude. Enough, on paper, to cover Spain's demand three times over. And yet Governor Greg Abbott has just declared a state of emergency over diesel shortages and record prices. The paradox is no paradox at all: the crude that comes out of Texas is light, ideal for gasoline, but Gulf Coast refineries have been configured for decades to process heavy Venezuelan or Mexican crude. The bottleneck is not at the well, it's at the refinery.
Why so much oil doesn't prevent a diesel shortage
The light crude Texas produces is cheap and perfect for making gasoline, but refining large volumes of diesel and aviation fuel calls for heavier crude. US refineries cannot process just any type of oil, and converting a plant to a different diet means billions of dollars and years of permits. On top of that, diesel is sold on a global market where price is set by worldwide supply and demand: some of the diesel refined on the Gulf of Mexico goes to the highest bidder. Hence the temptation to ban exports, a measure that would lower prices in the short term but create imbalances between regions.
Abbott's measures: dyed diesel and less sulfur
The emergency declaration, in force for 30 days and renewable, lifts restrictions on commercial transport. Texas now allows dyed diesel —chemically identical to regular diesel but tax-exempt and reserved for agricultural machinery— to be used on state roads, suspends low-emission rules and raises the maximum weight allowed for fuel, agricultural and timber loads. Abbott has also asked the EPA to waive the ultra-low sulfur diesel requirement. "Texas agriculture and freight transport depend on diesel," he argued. The average price in the state: $5.86 per gallon, about €1.40 per liter.
The global price and the Texas paradox
Diesel has surged due to global factors: Ukrainian drone attacks on Russian refineries, disruptions at Middle East facilities and problems crossing the Strait of Hormuz. It is estimated that between 4 and 6 million fewer barrels of refined products are being produced worldwide each month. In Texas, where people are used to paying very little for fuel, the spike has set off alarm bells. For many residents it is incomprehensible that, producing so much crude, they should pay such high prices. The crisis is not one of oil, it's one of refineries.
How long can a patchwork of burning dirtier fuel and running dyed diesel on the highways hold up?
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (52 replies).
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