US Gas Prices Reach Record Highs Due to Global Refining Capacity Shortage

Gas prices in the US have reached record highs, with Americans facing the most expensive August ever at the pump. The national average price of regular gas has surpassed $4.07 a gallon, and diesel prices are even higher at over $5.40 a gallon.

Global Refining Capacity Shortage

The surge in gas prices is not just due to crude oil prices but also a critical global shortage of refining capacity. According to S&P Global, the world has lost 7.5 million barrels of refining capacity daily, with nearly 40% of Russia's refining capacity destroyed due to infrastructure destruction in the Middle East and Russia.

This shortage has forced the US to cover global demand for diesel, depleting domestic inventories to 10% below average. Experts warn that even falling crude prices will not significantly lower fuel costs without restored refining capacity.

Refinery Maintenance and Inflationary Pressure

The next question is whether refiners in the US will forgo their usual fall maintenance schedules to capture record profits from record crack spreads. There has been concern that upcoming refinery maintenance could put further upward pressure on prices in the coming weeks.

Some refiners are considering putting off maintenance to capture these profits, but there is no confirmation from any of them currently. Shell has indicated that it expects refinery utilization to fall this quarter due to maintenance, which will likely exacerbate the situation and lead to sustained inflationary pressure.