Let’s refine, baby, refine!

Exploring the Impact of Refining Capacities on Gas Prices

Fossil fuel production in the United States has seen a notable increase under both the Trump and Biden administrations as discussed previously. Despite this rise in production, gas prices have remained high, primarily due to refining capabilities. Here, I explore the factors influencing gas prices, the role of refining capacities, and the differences in gas prices between the Trump and Biden administrations. Additionally, I will examine the strategic petroleum reserve (SPR) levels under each administration and their potential implications.

Under President Trump, the U.S. saw a significant boost in fossil fuel production, driven by policies aimed at deregulating the energy sector and promoting domestic energy independence. This trend has continued under President Biden, despite the administration's commitment to clean energy.

The real bottleneck in the fuel supply chain is not production but refining capabilities. The U.S. refining infrastructure has not kept pace with the increasing crude oil production and has been significantly reduced by the Biden administration.

Refineries convert crude oil into usable products like gasoline, diesel, and jet fuel. Limited refining capacity means that even if crude oil supply is abundant, the production of gasoline and other refined products can still be insufficient to meet demand.

Refineries operate at high capacities, often above 90%, which leaves little room for increases in output without significant investments in new refining infrastructure. Environmental regulations and the complexity of modern refineries further constrain the ability to quickly ramp up refining capacities. As a result, refining bottlenecks have a direct impact on gasoline prices, contributing to their volatility and persistence at higher levels.