US oil product exports surged to a record 8.2 million barrels per day last week as countries scrambled to replace fuel supplies disrupted by the Hormuz crisis, according to Bloomberg reporting, which noted that diesel exports led the increase and reached an all-time high.
Countries are now competing for refined products, including diesel, jet fuel, and gasoline as shipping disruptions around Hormuz destabilize downstream fuel systems tied to transportation, aviation, and industrial activity.
Europe’s growing jet fuel shortages and rising diesel demand across Asia are increasingly pulling more US barrels into international markets. The U.S. has effectively become the balancing supplier for global fuel markets while Gulf exports remain disrupted, giving Washington enormous pricing and supply influence even as the broader conflict continues destabilizing energy flows worldwide.
Despite these record U.S. exports, however, it won’t be enough to fully replace lost Gulf supply.
On top of the record volumes of refined products the U.S. is exporting abroad, it is also exporting more than 5 million barrels per day of crude, making it the supplier of last resort for global energy markets. Those barrels are increasingly coming from storage as inventories tighten and the Strategic Petroleum Reserve (SPR) remains heavily depleted from earlier emergency releases.
In addition, port infrastructure along the Gulf Coast is also operating near capacity, and every additional export barrel increases pressure on domestic fuel markets already dealing with higher gasoline and diesel prices.
That is starting to create a domestic political problem. Record export volumes help stabilize global markets, but they also tighten domestic supply balances and push American fuel prices higher at the exact moment the White House is trying to contain inflation heading into the midterms.
Countries across Asia have already moved to restrict fuel exports to protect local supply. If gasoline and diesel prices continue climbing in the United States while American crude and refined products keep leaving the country at record levels, pressure for some form of export restriction or emergency intervention will start growing quickly in Washington.
By Tom Kool for Oilprice.com
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