Continued on page 14 Our refineries make up more than 30% of the refining capacities in the Rockies region. We need to layer in the fact that we live in a market economy where local and regional supply and demand play a role in pricing. shortages that the rest of the economy is seeing, but we are also operating in a highly regulated environment where there is a long runway to drill new wells to increase production. • Politics are another factor: President Biden campaigned on no new drilling and then started to make good on that promise on his first day in office – that has resulted in a very real challenge to secure the necessary capital to drill new wells and expand production. Policy and rhetoric matter and when our leadership attacks an industry, the banks and financing entities make note of that capital risk. • Global politics also influence prices. We are often asked how impactful is Russia and the war in Ukraine on our fuel prices? The short answer is that there is a definite influence, but the White House trying to brand the dramatic energy price increases as “Putin’s price hike” is disingenuous. It is certainly true that Putin’s invasion of Ukraine has increased global oil prices, but it doesn’t let President Biden off the hook for his anti-oil and natural gas policies. According to data from the Energy Information Administration, the price of gasoline at the pump has increased every month during the Biden Administration. On Inauguration Day in 2021, the price of WTI was $53.40 a barrel. On Feb. 24, 2022, the day Russia invaded Ukraine, the price of WTI was $99.66 – an 87% increase. The increase caused by the invasion of Ukraine occurred on top of dramatically higher oil prices over the past year and cannot all be blamed on Vladimir Putin. Shrinking U.S. Refining Capacity Also Tightens Supply • But even as the supply of crude starts to catch up, we then need to have refining capacity available. • The challenge is that the U.S. has lost more than 1 million barrels a day of refining capacity. The U.S. consumes 9.2 million barrels a day of gasoline, so this is a significant loss. If projections and politics suggest there will be lower sustained demand in the future, the economic course of action may be to shutter capacity where competitiveness and profitability are in question. That has happened in the United States over the past couple of years. • Refinery utilization rates also matter. As of July 1, U.S. refineries were operating at an average utilization rate of nearly 95%, which is very high. In normal years, U.S. refineries typically operate at around 90% of utilization or higher, as you can see: o 2021: 86% (COVID impact) o 2020: 79% (COVID impact) o 2019: 91% o 2018: 93% o 2017: 91% o 2016: 90% o 2015: 91% o 2014: 90% • What this means is that we can’t push much more on our existing refining fleet; they are running full out, including here in Salt Lake City. • Even with 1.1 MMBD less refining capacity, the United States is manufacturing more gasoline, diesel and jet fuel than any other country, supplying both our domestic and the global market. Our near 95% utilization rate (the highest in the world) means we’re processing about 17 million barrels of petroleum every day. The Power of the Free Market • Our refineries make up more than 30% of the refining capacities in the Rockies region. We need to layer in the fact that we live in a market economy where local and regional supply and demand play a role in pricing. Not only is Utah somewhat of an island, with limited crude and finished product pipelines incoming, but the regions that we supply finished product to from our refineries are even more limited in terms of options for the finished product. • Utah has one finished product pipeline coming in: o The Pioneer petroleum product pipeline carries refined fuel to Salt Lake City from the Sinclair refinery in Wyoming. 13 UPDATE
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