by Chris Black
Every time oil goes up, gas prices go up, to the point that we are now paying $190 per barrel equivalent at the pump.
There isn’t a supply problem.
Widespread US Diesel Shortages Send Crack Spreads To Mindblowing Highs t.co/TczW6B8Hjn
— zerohedge (@zerohedge) May 11, 2022
At the current prices, refiners should be putting out product at a record rate.
There is a massive demand problem and the big traders know it.
They are attempting to paper over the demand destruction to keep the record profits off contract churn.
From 1980-2000 the crack spreads were incredibly stable, only shooting up during the gulf war. You were talking a range of around $3 to $6. Energy companies were some of the most profitable businesses with crack spreads under $5.
Everything went crazy after 2000 with an average spread over the last 20 years of $18, representing a massive windfall.
It wasn’t the oil companies that did it though.
It was Goldman Sachs and other Wall Street funds who were suddenly able to gamble in commodity futures like a table in Macau.
All thanks to Bill Clinton with the Commodity Futures Modernization Act, then George Bush with the repeal of Glass Steagal.