Save for later Print Download Share LinkedIn Twitter Global products markets were already uncomfortably tight and driving the current oil price spike before Europe proposed a ban on Russian petroleum imports this week. Now, the situation looks downright dire. Historically, energy crises have been caused by shortages in crude supply. This one, however, is mostly down to a shortage in refining capacity, and there does not appear to be much relief in sight. Even with margins at historically high levels, global refiners can not ramp up runs due to the loss of some 4 million barrels a day of capacity during the pandemic when demand collapsed. Refiners in Europe are making close to $100 per barrel processing crude into diesel, a historic margin that shows how tight the European fuel market is. But refining crack spreads are rich around the world, and not just for diesel. Jet fuel is even more expensive, gasoline is rising fast since refiners are now concentrating on making diesel to capture the sky-high margins, taking volumes away from gasoline. Energy Intelligence's refining model shows refiners can make close to $30/bbl in Europe and the US, and $20/bbl in Asia. During the pandemic, the US closed 1.4 million b/d in capacity, Europe shut in 1.1 million b/d, Asia 1.2 million b/d and South Africa 300,000 b/d. Adding to the tightness is a heavy maintenance season for work postponed during the pandemic. “Even with relatively high utilization, current refining capacity can barely keep up with demand and is incapable of concurrently increasing global product inventories,” said Tom Nimbley, CEO of US refiner PBF.