A historic surge in U.S. energy exports is depleting domestic stockpiles and pitting American consumers against foreign buyers, keeping upward pressure on fuel prices. The U.S. shipped a record 14.2 million barrels of crude oil and petroleum products daily in late April, a volume equivalent to roughly one of every seven barrels consumed globally, as international markets scramble to replace barrels from the Middle East.
“We have to essentially get squeezed to the point where prices move higher to stop the barrels leaving,” said Matt Smith, director of commodity research at Kpler. The unprecedented outflow is testing the limits of the U.S. energy system, with the Trump administration attempting to contain rising prices through measures like waiving shipping restrictions and releasing strategic stockpiles.
The export-driven demand has led to a significant drawdown in domestic inventories. On the Gulf Coast, stocks of diesel and other fuels have fallen by nearly 19% from pre-war levels, according to the Energy Information Administration. Commercial crude stocks, excluding the Strategic Petroleum Reserve, fell by 4.3 million barrels in the week ended May 8. At the key storage hub in Cushing, Oklahoma, some analysts predict inventories could fall to levels that complicate operations within the next two months.
This relentless demand from abroad is a primary factor behind sustained high prices for American drivers. The national average for a gallon of gasoline stood at $4.51, while the U.S. benchmark, WTI crude, settled at $105.42 a barrel. The pressure is even more acute for diesel, with U.S. refiners like Marathon Petroleum and Valero running at full capacity to meet global demand.
In a sign of the strain on Gulf Coast export infrastructure, East Coast ports have seen a dramatic increase in fuel shipments. The ports of New York, Philadelphia, and Albany, N.Y., exported 174,000 barrels a day of gasoline, diesel, and other products last month, a tenfold increase from the same period last year, according to Kpler data. These barrels are predominantly heading to Europe, signaling a widespread shortage of refined products.
The unusual trade flows suggest that Gulf Coast refiners are running out of dock capacity and are sending barrels north via the Colonial Pipeline to find alternative export routes. “The East Coast is short, but the market is seeing regions that are even tighter and more shorter, and that’s why we’re seeing these very unusual trade flows,” said Brian Stetter, director of Americas fuels and refining at S&P Global.
Countries that previously relied on Asian and Middle Eastern supplies are now turning to the U.S. The U.S. exported 2.7 million barrels of refined products to Australia in March, a route that was sporadic before the war. Marathon Petroleum’s chief commercial officer, Rick Hessling, noted the company’s Los Angeles refinery sent diesel to Australia for the first time. This foreign demand is directly impacting prices at home, with a gallon of diesel in California costing $7.42, up from $5.10 before the war. The ongoing conflicts involving Iran and Ukraine, coupled with high input costs, are expected to sustain price volatility for the foreseeable future, as noted in recent market analysis [1].
This article is for informational purposes only and does not constitute investment advice.
