Beyond the Strait of Hormuz: Refining capacity and product-market vulnerability

The recent disruption in the Middle East, including the closure and uneven reopening of the Strait of Hormuz, has exposed a shift in the global energy system’s principal vulnerability. Initial concern focused on whether enough crude oil could reach the market. Yet crude flows have recovered faster than supplies of gasoline, diesel, jet fuel and other products. Strategic petroleum reserve releases, softer Chinese demand and alternative export routes have helped cushion the crude market, but they cannot substitute for operational refineries. The central constraint is therefore no longer simply the availability of crude; it is the capacity to process the right grades of crude into usable fuels and deliver them to consumers. That distinction defines the current global market imbalance. […]