Key facts
- U.S. gasoline inventories are at their lowest seasonal level in a decade, with a decline of over 34 million barrels since the start of the Iran war.
- Distillate fuel oil inventories have reached a 23-year low.
- U.S. refiners are prioritizing diesel and jet fuel production due to global shortages and higher margins.
- Fuel exports, particularly of diesel and jet fuel, have reached record highs.
- Analysts predict total demand for U.S.-produced fuel this summer could exceed current production capacity.
U.S. motorists are heading into the peak summer driving season with a tight gasoline market, as robust domestic demand and increasing fuel exports strain already low inventories. Disruptions at the Strait of Hormuz, a critical oil transit route, have exacerbated the situation by leading U.S. refiners to prioritize more lucrative diesel and jet fuel production to meet global shortages.
Analysts warn of a looming supply deficit, noting that U.S. gasoline demand has remained strong despite a roughly 40% surge in pump prices since the start of the Iran war. Additionally, unplanned refinery outages have been more frequent than anticipated, further impacting supply. The comfortable gasoline supply cushion built during winter has vanished, with inventories falling to their lowest seasonal level in a decade by the end of May.
Distillate fuel oil inventories have also hit a 23-year low. With strong demand for gasoline and high export volumes of diesel and jet fuel, total demand for U.S.-produced fuel this summer could exceed the current production capacity of fuel makers. This dynamic leaves gasoline as a neglected product in refinery output, as refiners focus on capturing strong margins from distillates.
Historically, Europe served as a source of gasoline imports for the U.S., but this fallback is now logistically difficult and less economical due to Europe's own tight supplies and soaring freight rates. Experts suggest that gasoline inventories could continue to drop weekly during the summer crunch. While refineries are operating at high capacity, concerns remain about their ability to sustain this level, especially with potential deferral of maintenance.