Global refinery crisis triggers worst fuel shortage since crude oil boom ended

Refineries worldwide are running far below their typical seasonal capacity, triggering a supply crunch that has left fuel and petrochemical markets tighter than the crude oil sector itself.

Global refinery outages stood 60 per cent above seasonal norms in late August, according to estimates by Goldman Sachs analysts led by Yulia Zhestkova Grigsby. The disruptions have translated into sharply reduced availability: global refined-product exports were down 25 per cent year on year in August, with losses concentrated in Russia and the Persian Gulf.

Industrial fallout spreads beyond the pump

The shortfall is rippling through industries far removed from petrol stations. In Japan, naphtha: a flammable liquid processed from crude oil used in polyester fibres, packaging and industrial solvents, has become so scarce that snack maker Calbee replaced its colourful packaging with monochrome designs. Japanese media have begun referring to "naphtha bankruptcies" to describe the pressure on companies struggling to secure oil-derived inputs.

A June survey by corporate research firm Tokyo Shoko Research found that about 80 per cent of more than 7,000 responding firms had difficulty procuring oil-derived products. David Chen, a Chinese national living in Japan, said he initially mistook Calbee's packaging shift for a marketing campaign before news reports linked it to the naphtha supply crunch.

Geopolitics and Chinese export curbs tighten supply

Market and industry analysts attributed the tight conditions to two main pressures: mounting geopolitical conflict and fuel export controls from China, which has the world's largest oil-refining capacity. The combined effect has left Japan's squeeze as part of a wider strain on global supply.

The scale of refinery disruptions, running 60 per cent above seasonal averages, suggests the gap between crude availability and refined-product output has widened significantly, even as crude prices themselves remain relatively stable.

Source: South China Morning Post