The global crude oil refining system is under severe strain, with Ukrainian attacks on Russian refineries and U.S. facilities running near maximum capacity combining to leave almost no room for disruption.
Bob McNally, founder and president of Rapidan Energy Group, examined the pressure on the global refining system in an interview with Bloomberg. McNally cited two main drivers: increased Ukrainian strikes on Russian refining infrastructure and U.S. refining facilities operating at near maximum capacity following the closure of the Strait of Hormuz.
The Strait of Hormuz, a critical chokepoint for global oil shipments, has been closed, forcing adjustments across the refining supply chain. With U.S. facilities already running close to their limits, any additional disruption has an outsized effect on available capacity worldwide.
McNally described the situation as one in which the global refining system has no margin for error. The combination of reduced Russian refining output due to Ukrainian attacks and strained American capacity leaves the market with little ability to absorb further shocks.
The refining sector sits between crude oil production and the fuels that consumers and industries actually use. When refining capacity tightens, it can push up prices for gasoline, diesel, and other petroleum products even if crude oil itself remains available. The current situation reflects pressure on both the supply of crude and the ability to process it.
No timeline was given for when Hormuz might reopen or when Ukrainian attacks on Russian facilities might ease.
