Publications: Notes at the Margin

The IEA Strategic Stock Release (August 8, 2022)

 

Crude oil refiners and marketers received a huge profit windfall from the March 31 announcement of a sizeable strategic oil stock release by the United States and other International Energy Agency member countries. Conversely, crude oil producers across the world suffered. By August 8, the producers had lost $325 billion. If the trend continues through March 2023, a full year, the total will reach almost $1 trillion. Saudi Arabia will lose $100 billion and Russia nearly $90 billion.

 

To date, refiners have captured most of the losses recorded by producers because of the global capacity shortage. The exception is France, where refiners agreed to substantial price cuts to avoid a windfall tax on profits. Consumers, though, saw little benefit anywhere.

 

The income transfer is occurring because the tighter financial conditions imposed on the oil industry have broken traditional arbitrage relationships. The refining sector has seized the advantage created by the reduced bank lending and the SPR release announcement’s impact on speculative activity to drive a wedge between crude and product prices.

 

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