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The quest for Wally World inside the world of crude oil refining

It’s with the threat of a tsunami of frustration, impending doom, and boredom that I will attempt to lighten this discussion by using personification to capture your interest, thus preventing terminal glassy-eyed (or should I say gassy-eyed) syndrome, which accompanies any talk of the Keystone XL pipeline.

It’s been 10 pre-iPad years now, and the process is as pathetically comical as the never-ending summer vacation trip in search of the mythical Wally World.

Proponents of the pipeline thought they were in the driver’s seat, but the E-Wacks in the backseat still don’t believe it when they are told, “We’ll get there when we get there so stop asking!” The trip has been so long that the front to back seat conversations have been diluted to unprintable mutterings, and the latter no longer listens to the timetable excuses – no matter how logical they may be. By the end of this week, yet another but reportedly last fielding of arguments pro and con will be heard by a Nebraska commission of four Republicans and one Democrat, with not a president or secretary of state in sight.

The last gasp comments by those opposed opine that the pipeline has a “limited market need.”

Oh really?

Does this mean that the U.S. doesn’t import independent crude oil anymore? If so, why is it that the U.S. is still importing crude at the rate of 8 million bpd?

Ahhh! Maybe they mean the demand for crude oil and its refined derivatives is dropping like a stone. They should check their own government’s stats that show refinery runs are at 96% capacity nationally, with the Midwest at 99% and the Gulf hub running at 96%.

Although the media look at gasoline demand as exciting and glamorous to the excitable consumer, it’s distillates that grab my attention and that of the importers of crude, especially refiners. Distillates are the true economic scribes because they include diesel, jet fuels, and heating oils – the industrial lifeblood of the economy.

While U.S. gasoline demand has been flat to negative since the beginning of the year, distillate demand has been in double figures, which is the reason crude inventories are falling as refiners must keep pace with distillate demand.

The more demand for refined products the more the need for crude, especially heavy crude from the likes of Alberta’s Western Canadian Select, and the heavy sours from Venezuela. With the Venezuelans now under sanctions by the Trump administration, the refiners on the Gulf and in the Midwest will have increased need for the heavy crude they have been designed to process, as opposed to the light sweet variety used by eastern U.S. refiners. And, the source of this heavy crude is their politically stable and largest trading partner to the north!

But getting crude to our U.S. customers, the Refining World has become more difficult and certainly less amusing than the quest for Wally World.

The quest for KXL has become a comedy of sorts, but one of political errors that we will all pay dearly for.

Roger McKnight

Roger McKnight

Roger McKnight is the Chief Petroleum Analyst with En-Pro International Inc. Roger has over 25 years experience in the oil industry, and has held senior marketing management positions responsible for national and international accounts. He is the originator of the card lock concept of marketing on-road diesel that is now the predominant purchase method of diesel in Canada. Roger's knowledge of the oil industry in North America, and pricing structures has resulted in his expertise being sought as a commentator by local, national, and international media. Roger is a regular guest on radio and television programs, and he is quoted regularly in newspapers and magazines across Canada.
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