Too much oil. Imagine that.
A gasoline inventory increase on the East Coast is causing big tankers headed to New York to change course midway, reports Bloomberg. At least five tankers bound for New York last month detoured due to the East Coast’s “stockpile buildup,” because we are all now swimming in gasoline. Hopefully, no one’s smoking a cig.
Both oil refinery profits and trans-Atlantic shipping rates have gone down because of the increase in inventory, and European plants are sending more of what they produce to Africa, according to shipping charters obtained by Bloomberg.
The buildup is caused “by the lowest U.S. gasoline demand since 2012 at a time when refiners are processing more than normal,” according to Bloomberg. This is likely because of a variety of things, such as rises in falls in the economy and fuel efficient vehicles.
Shipping rates, as mentioned above, have fallen as a direct result:
The build-up has caused vessel rates on the cross-Atlantic route to fall about 25 percent since the start of the year. A Bloomberg survey this week showed 15 charters booked or anticipated in the next 2 weeks, the lowest in 2 months. Two of the tankers that diverted from New York last month, sailed south to the Caribbean, often used as a storage location for onward shipments to Latin American markets.
Demand for trips to the East Coast is low and will be expected to stay low until turnaround occurs later in the year.
Don’t get your hopes up, though. This doesn’t necessarily mean cheap gas. Since gasoline is a commodity, its prices are based more on global oil prices and are less determined by a surplus of a small region. Plus, the United States is crisscrossed with so many pipelines that oil could easily be shipped from region to region.
This is neat and weird because I’m just imagining a tanker filled with oil, bound for the U.S. and suddenly getting told, “Don’t come here, we’ve got too much!”
Then they were like, “Oh, no! Then where shall we go? Who needs oil?”
Someone else went, “Africa!”
The tanker said, “Okay!” And that’s where they went.