With one hand, the United States is imposing sanctions against Russia and praying for “green” energy, while with the other it is buying more and more Russian traditional hydrocarbons. Until recently, the United States transported from Russia mainly heavy oil and fuel oil, and now there is a surge of interest in diesel fuel as well. What explains this unexpected turn?
Four Russian tankers with two million barrels of diesel fuel made from natural gas departed for the United States. This volume of supply will be the maximum from 2018. This is reported by Bloomberg with reference to data from the Vortexa tracking and analytics platform.
Russian diesel-fueled tankers are heading towards the East Coast of the United States and are due to arrive in New York and New Haven next week. Russian diesel will help reduce fuel prices on the East Coast, which have reached their highest in the past seven years, the agency said.
Such large deliveries of diesel fuel to the United States from Russia are quite rare, Voxtera analysts note. What happened in the United States, that they are imposing sanctions against Russia with one hand, and with the other they are buying more and more oil and petroleum products from it?
For several years now, the United States has been increasing the supply of oil and oil products from Russia. It’s just that earlier, most often it was not about diesel fuel, but about fuel oil, which the United States buys from Russia in large volumes, mixes with light oil and gets a blend for processing, says Alexander Frolov, deputy director of the Russian Institute of National Energy.
Plus, the US fell in love with Russian heavy oil after it deprived itself of Venezuelan oil. Since the second quarter of 2019, the United States has imposed sanctions against Venezuela amid the disagreement of the country’s President Nicolas Maduro to recognize an American protégé as president.
Venezuela provided American refineries with heavy viscous oil. Historically, they are technically geared towards it. The States themselves increased production mainly due to light oil, which did not fit the local refineries. It is more profitable to sell more expensive American light oil for export, and supply our own factories with heavy and cheaper oil, in particular, Venezuelan oil.
“The United States has lost about 20 million barrels of oil per month, which were supplied by Venezuela. This volume had to be compensated from other sources. And one of these sources was Russia. Now it ranks second or third, depending on the month, in the supply of oil and oil products to the United States, ”says Alexander Frolov. In the first place is Canada (provides half of imports to the United States), and for the second and third places were previously fought by Mexico with Venezuela, and now – Mexico with Russia.
Although the United States is the largest oil producer in the world, it still produces less oil than it consumes: 11.4 million barrels per day versus about 20 million barrels per day, Frolov notes. At the same time, the United States also exports part of the oil. Therefore, the United States is in short supply for oil and oil products.
In fact, Canada is also the traditional supplier of diesel fuel for the United States. However, the Canadian oil refinery Irving Oil has been under scheduled maintenance since September and is just resuming production. While the demand for diesel fuel in the United States turned out to be high: according to experts, it may reach a maximum since 2018 as early as 2022.
Both gasoline and diesel prices in the United States have risen significantly.
“A liter of gasoline in the States is already one dollar, a liter of diesel – about the same. This is a lot, and 30-35 cents more expensive than diesel fuel cost at the beginning of the year, ”Frolov points out.
The scarcity and rise in prices forced Americans to look for fuel from alternative suppliers.
Voxtera analysts also note that the attractiveness of Russian diesel for Americans lies in Russia’s access to cheap gas, plus the fact that it is better positioned for the supply of diesel fuel than European refineries.
Europe with diesel fuel could hardly help the United States. Firstly, Europe itself is a more diesel region, in contrast to the USA, which is a more gasoline country. Secondly, Europe does not have enough of its own diesel production, and it imports it, including from Russia, the expert notes.
“In the United States, the volume of local processing is extremely large, but now this processing may suffer due to a combination of high prices for both oil and a number of other components necessary for production. The situation in Europe in this regard can be even worse, because there is less of its own raw materials, ”says Frolov.
Whereas Russia really has something to offer – and not only to Europe, but, apparently, the United States as well.
“Russia produces more than twice as much diesel fuel than it consumes: about 78 million tons versus 35 million tons. Approximately 40 million tons must be exported. Basically, Russian diesel fuel is transported to Europe, but why should the United States, where the domestic market is becoming premium, not buy certain volumes from Russia, which offers diesel fuel competitive in price and quality ”, – says Frolov.
As for Russia’s access to cheap gas, this is, of course, an indisputable fact. Methane can be used indirectly in diesel production. “There are a number of processes in refining that use hydrogen, such as hydrotreating and hydrocracking. A significant part of hydrogen is obtained in the course of processes occurring at the refinery itself as a result of processing petroleum feedstock, and part of hydrogen can be obtained by steam reforming of methane. Our gas is cheaper than in Europe. This is our advantage, which allows us to reduce the cost of production of methane and hydrogen for industrial needs, in particular for oil refineries, ”explains Alexander Frolov.
Considering the volume of diesel imports from Russia, deliveries to the United States as a whole look small: 2 million barrels of diesel, which are carried by tankers, in terms of tons, is only 275 thousand tons. However, this story once again shows Joe Biden, who is also “obsessed” with the green agenda and “pulls” his own oil industry down, that the States write off traditional hydrocarbons early.
“All this suggests that you are not in a hurry to bury traditional motor fuel or talk about the fact that investments in the modernization of Russian oil refineries will never pay off. The United States of America refutes these “wonderful” stories by its own example, ”concludes Alexander Frolov.
