NewBase 05-December-2022 Energy News issue - 1571 by Khaled Al Awadi_compressed.pdf

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NewBase Energy News 05 December 2022 No. 1571 Senior Editor Eng. Khaed Al Awadi
NewBase for discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
OPEC+ to consider deeper oil output cuts ahead of Russia
sanctions and proposed price cap
CNBC - Sam Meredith@SMEREDITH19
OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on
Sunday to decide on the next phase of production policy. The highly anticipated meeting comes
ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and
mounting fears of a recession.
Sunday to decide on the next phase of production policy.
OPEC and non-OPEC oil producers could impose deeper oil output cuts on Sunday, energy
analysts said, as the influential energy alliance weighs the impact of a pending ban on Russia’s
crude exports and a possible price cap on Russian oil.
Sunday to decide on the next phase of production policy. The highly anticipated meeting comes
ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and
mounting fears of a recession.
Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told CNBC from
OPEC’s headquarters in Vienna, Austria, that he believes the group “would be better off to stay the
course” and roll over existing production policy.

“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in
China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti
said.
Energy market participants remain wary about the European Union’s sanctions on the purchases of
the Kremlin’s seaborne crude exports on Dec. 5, while the prospect of a G-7 price cap on Russian
oil is another source of uncertainty.
The 27-nation EU bloc agreed in June to ban the purchase of Russian seaborne crude from Dec. 5
as part of a concerted effort to curtail the Kremlin’s war chest following Moscow’s invasion of
Ukraine.
Concern that an outright ban on Russian crude imports could send oil prices soaring, however,
prompted the G-7 to consider a price cap on the amount it will pay for Russian oil.
No formal agreement has yet been reached, although Reuters reported Thursday that EU
governments had tentatively agreed to a $60 barrel price cap on Russian seaborne oil.
“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up
in the air, and this adds to the uncertainty.”
The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause
more harm than good.
‘So much uncertainty’
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November.
It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global
economy.
The energy alliance recently hinted it could impose deeper output cuts to spur a recovery in crude
prices. This signal came despite a report from The Wall Street Journal suggesting an output
increase of 500,000 barrels per day was under discussion for Sunday.
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November.
It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global
economy.
Speaking earlier this week, RBC Capital Markets’ Helima Croft said there was no expectation of a
production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper
output cut.
“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates
“have to factor in what happens with China but also what happens with Russian production.”
However, after news that Sunday’s meeting will be held virtually, rather than in-person, Croft said
in a research note that OPEC had opted for “no-drama optics” which “seemingly increases the
likelihood of a rollover decision.”
“Irrespective of whether the group chooses to stay the course or cut deeper, we expect key ministers
to signal a willingness to meet quickly to address any major change in market conditions that may
be arising in the coming weeks and months,” she said in the note.
Oil prices, which have fallen sharply in recent months, were trading slightly lower ahead of the
meeting.

International Brent crude futures traded 0.2% lower at $87.78 a barrel on Friday morning in London,
down from over $123 in early June. U.S. West Texas Intermediate futures, meanwhile, dipped 0.3%
to trade at $80.95, compared to a level of $122 six months ago.
Goldman Sachs’ Jeff Currie says OPEC+ highly likely to impose oil output cut
“Barring any negative surprise during Sunday’s virtual OPEC+ talks and assuming a healthy
compromise on Russian oil price cap before the EU sanctions kick in on Monday it is tempting to
audaciously conclude that the bottom has been found,” Tamas Varga, analyst at broker PVM Oil
Associates, said in a note Thursday.
Varga said oil prices trading below $90 a barrel was “not acceptable” for OPEC and Russia was
widely expected to introduce retaliatory measures against those signing up for the G-7 deal.
“Choppy and nervous market conditions will prevail, but the new month should bring more joy than
November,” he added.
‘High probability’ of an output cut
Jeff Currie, global head of commodities at Goldman Sachs, said OPEC ministers would need to
discuss whether to accommodate further weakness in demand in China. “They got to deal with the
fact that, hey, demand is down in China, prices are reflecting it, and do they accommodate that
weakness in demand?” Currie told CNBC’s Steve Sedgwick on Tuesday.
“I think there is a high probability that we do see a cut,” he added.Analysts at political risk
consultancy Eurasia Group said that lower oil prices “heighten the risk” of a new OPEC+ output cut.
“Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how
much disruption is evident in markets because of the EU sanctions,” Eurasia Group analysts led by
Raad Alkadiri said Monday in a research note. If Brent crude futures dip below $80 a barrel for a
sustained period ahead of the meeting, Eurasia Group said OPEC+ leaders could push for another
production cut to shore up prices and bring Brent futures back up to around $90 — a level “that they
appear to favor.”

Europe thirst to energy can't look to U.S. shale to fill any OPEC gap
Reuters + NewBAse
U.S. shale oil drillers turned from scrappy wildcatters into multi-millionaires over the past two
decades, propelling the United States to become the world's largest producer, but now they are
running out of runway.
Oil output gains are slowing and executives from some of the largest firms are warning of future
declines from overworked oilfields and less productive wells.
On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) meets to decide
whether to hold the line or cut its output, no longer afraid that their policy decisions might provoke
a surge in shale production in the way they did in the years before the pandemic.
The sidelining of U.S. shale means consumers around the world may face a winter of higher fuel
prices. Russia has threatened to block oil sales to countries supporting a European Union price cap,
and the United States is winding down releases from emergency oil stockpiles that helped cool
energy inflation.
U.S. shale production costs are soaring and there is no sign that tight-fisted investors will change
their demands for returns rather than investment in expanding drilling.
During a decade of stunning growth, shale consistently defied production forecasts, and opposition
from environmentalists, as technology broke open more and more shale plays and revolutionized
the global energy industry.
But there appears to be no new industry-transforming technologies in the works or cost-savings that
could change the picture this time around. Inflation has pushed up costs by up to 20%, and less
productive wells are crimping the industry's ability to produce more.

Research and engineering spending at top oilfield firm SLB (SLB.N) this year dropped to 2.3% of
revenue through September, from 2.4% in the same period a year ago. At Helmerich &
Payne (HP.N), one of the largest drilling contractors, its R&D budget will rise only $1 million, from
2022's $27 million.
Industry spending on new oil projects, said analysts last week at Morgan Stanley, "is modest at best
and the absolute level of investment is still historically low."
Shale has proven naysayers wrong in the past. After the 2014-2016 OPEC price war put hundreds
of oil companies into bankruptcy, shale innovated with less expensive ways of operating. Their
subsequent gains gave the United States by 2018 the title of world's largest crude producer, a
distinction it still holds.
FIZZLING OUT
Investors have put dividends and share buybacks ahead of more production gains in the past few
years, said executives.
That has changed the ability of shale producers to react to spikes in international oil prices, said
Bryan Sheffield, who sold producer Parsley Energy and now runs an energy-focused private equity
fund.
"Shale can't come back to become a swing producer," Sheffield said, because of the investors'
unwillingness to finance growth. The demand for payouts and repeated price busts have forced oil
producers and service companies "to cut back on science projects" that fed past production
breakthroughs, he added.

Technology development that led to innovations such as multi-stage hydraulic fracturing "will slow
down and has slowed down," said Richard Spears, a vice president at researcher Spears &
Associates. "If you want to advance how far you can drill out and how fast, that now becomes a
problem."
The industry also has less time to regain its former leadership, said Hess Corp (HES.N) CEO John
Hess. He estimates rivals have about a decade of running room before they fizzle out. Shale is "no
longer in the driver's seat" with OPEC regaining control over the market, said Hess.
The U.S. government expects overall oil production to reach a new peak next year, but it has several
times this year cut its forecasts. It recently slashed 2023 production growth outlook by 21%, to a
gain of about 480,000 barrels per day (bpd), to 12.31 million bpd. That could mean less growth
compared to the mere 500,000 bpd gain this year - which is already well short of lofty expectations
of an about 900,000 bpd gain this spring.
SHALE'S WANING INFLUENCE
Shale's waning influence is clear in North Dakota. Once the vanguard of the U.S. shale oil industry,
poor well productivity in the state's Bakken region and labor shortages have left it far from its boom
days.
About 4% of its shale drilling inventory remains high producing, or Tier 1, locations, down from 9%
at the start of 2020, according to production technology firm Novi Labs, which focuses on oil and
gas well returns.
As the number of prime drilling locations decline across all shale fields, the outlook is grim. Shale
production declines rapidly after peaking compared to conventional oil wells, falling about 50% after
the first year.
"It's kind of a canary in the coal mine for what's going to happen in the other unconventional oil
plays," said Ted Cross, director of product management Novi Labs and a former oil company
geologist, referring to North Dakota.
The Permian Basin of west Texas and New Mexico, the largest and most important U.S. oilfield, is
the only U.S. shale region to exceed its pre-COVID-19 pandemic oil production levels, according to
U.S. Energy Information Administration data.
Even that field is showing signs of stress.
"There are a bunch of underlying causes, but frac sand is so expensive now, tight labor markets
make last-mile logistics difficult, and public producers are generally more willing to miss on
production than on capex," said Matt Hagerty, a senior analyst for FactSet's BTU Analytics.
Initial production rates on a new well in the Central Midland basin section of the Permian averages
about 790 barrels per day of oil, according to researcher BTU, down from 830 bpd just six months
ago. Its outlook for initial output in another shale field, the eastern Eagle Ford, is down to 778 bpd
from 828 bpd.
PERSISTENT LABOR SHORTAGES
"We're going to go into 2023 with a serious workforce shortage," said North Dakota Department of
Mineral Resources Director Lynn Helms. The northern state has historically had difficulty attracting
workers, and the tight labor market has worsened the problem.
Attracting laborers for crews needed to run frac fleets and rigs has been stubbornly difficult, Helms
said, adding that more drilling rigs have moved south to the Permian.

The number of oil and gas extraction workers in North Dakota fell by 12% between 2019 and 2021,
the most recent annual Bureau of Labor Statistics data show, compared to New Mexico's 9.6% drop.
Lower production rates are "a longer-term prospect," said Mike Oestmann, chief executive of shale
producer Tall City Exploration. Other issues depressing potential shale gains: a lack of regulatory
clarity and the U.S. government's desire to shift away from fossil fuels, he said.
With producers determined to put limited resources into the best drilling prospects, "we won't be
able to keep this up forever," said Kaes Van't Hof, finance chief at Diamondback Energy, in a recent
earnings call.
The U.S. Energy Department has been cutting forecasts for U.S. crude production all year after
slower-than-expected increases in output.

Italy’s largest refinery owned by Russia’s Lukoil will not be nationalized
Bloomberg + NewBase
Italy’s largest refinery, which is owned by Russia’s Lukoil, is not destined for nationalisation,
according to Industry Minister Adolfo Urso.
The Italian government paved the way for putting strategic oil and gas infrastructure under
temporary administration on Thursday, in a move which set the stage for a temporary state takeover
of the ISAB Lukoil refinery in Priolo, Sicily, which has been struggling to secure funding ahead of
a European Union ban on Russian oil due to kick in on December 5.
Asked whether the plant was headed for nationalisation, Mr Urso told the newspaper Corriere della
Sera on Saturday: “Absolutely not.”
The government is taking on temporary administration of the refinery with the option of entrusting
management to publicly-controlled companies operating in the same sector “to guarantee the
continuity of production and therefore the energy supply of the country, also safeguarding
employment,” Mr Urso said.
In the meantime, Mr Urso added that the ownership of the refinery can continue talks for ceding it
to others.
Italian energy giant Eni could become involved, “and this will give a guarantee of production
continuity,” newswire Ansa cited Mr Urso as telling reporters in Sicily on Saturday. Mr Urso also
said he had received a US guarantee on Saturday morning that banks which will finance bridge
operations will not be subjected to US sanctions.
ISAB refinery has been struggling to secure
funding ahead of EU ban on Russian oil

The urgent law approved by Prime Minister Giorgia Meloni’s cabinet on Thursday gives the
government the power to put power stations, pipelines and other energy plants under temporary
administration for up to two years, according to a statement. The law is aimed to “defend the national
interest on strategic production sectors,” according to a statement.
Italian banks had been wary that extending credit to ISAB would incur secondary sanctions in the
US that would restrict access to dollars, Bloomberg reported in November. The refinery is one of
Europe’s biggest oil-processing complexes, with a combined capacity of well over 300,000 barrels
a day, according to data compiled by Bloomberg.
Oil major Eni, the country’s biggest refiner, said its refining operations were not
affected by the decree and confirmed that planned maintenance at its 190,000 b/d
Sannazzaro refinery in northern Italy will go ahead from mid-March.
Separately, sources close to Lukoil’s 321,000 b/d ISAB refinery and Sonatrach’s
160,00 b/d Augusta plant, both in Sicily, said operations have been unaffected by the
lockdown so far. Maintenance work at Eni’s 120,000 b/d Taranto refinery is also on
track, a source close to the refinery said.

U.S. wind generation falls into regional patterns by season
U.S. EIA, Power Plant Operations Report and Preliminary Monthly Electric Generator Inventory
Wind plant performance—how much electricity a wind plant generates compared with its maximum
possible generation—depends almost entirely on the availability of wind resources, which vary
depending on both the time of year and the geographic region.
The performance of a power plant is often characterized as a percentage of the maximum possible
generation in a given time period, a metric known as capacity factor. Nationally, between January
2016 and August 2022, wind plant capacity factors peaked in March and April and were at their
lowest in July and August.
Unlike fossil fuel-fired power plants, such as coal or natural gas plants, wind plants don’t incur any
fuel costs to generate electricity, so the electricity they produce is almost entirely determined by
available wind resources. Wind plant performance is influenced not just by wind speed, but also by
wind direction, wind constancy, and turbine height.
Because of geographic differences in wind resource potential, wind generation varies across
regions. We grouped states into regional groups that have similar wind capacity factor patterns. The
Lower Plains region of Texas, Oklahoma, Kansas, and New Mexico has the largest share of U.S.
wind capacity, at 44% as of August 2022.
Because of the concentration of wind capacity in the Lower Plains, the national wind performance
pattern follows the seasonal wind performance pattern of the Lower Plains quite closely:
performance peaks in the spring, declines in the summer, and rises again in the fall and winter.
The Upper Plains region has the second-largest share of U.S. wind capacity, at 29%. The Upper
Plains also generally follows the same seasonal pattern as the Lower Plains.

The Interior East region (13% of U.S. capacity) follows that same pattern but with a steeper decline
in the summer months than the Lower and Upper Plains.
The seasonal pattern is quite different in the West Coast region (10% of U.S. wind capacity), where
the pattern is driven largely by a concentration of wind capacity in California. Wind capacity factors
in the West Coast region rise later in the spring and peak in the summer months before steadily
declining into the fall and winter.
This pattern results from the cold air of the Pacific current interacting with the sea breeze as well as
the location of California wind plants, which are generally close to mountain passes near the coast.
In the Southwest, East Coast, and New England, capacity factors were slightly lower than the
national average, and they have fewer wind plants. In total, these three regions made up 4% of the
country’s wind capacity as of August 2022.
We publish data on capacity, generation, and capacity factor at the national level in our Electric
Power Monthly. We publish state-level statistics in our State Electricity Profiles. Many data series
are also available in our Electric Data Browser.

NewBase December 05 -2022 Khaled Al Awadi
NewBase for discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oil up 3% on OPEC+ output plans & price cap on Russian crude
Reuters + NewBase
Oil prices rose 3% on Monday after OPEC+ nations held their output targets steady ahead of a
European Union ban and the start of a G7 price cap on Russian crude.
At the same time, in a positive sign for fuel demand in the world's top oil importer, more Chinese
cities eased COVID-19 curbs over the weekend.
Brent crude futures were up $1.03, or 1.20%, at $86.60 a barrel by 1630 GMT. WTI crude futures
gained $1.00, or 1.24%, to $80.98.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia,
together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million
barrels per day (bpd) from November through 2023.
"The decision ... is not a surprise, given the uncertainty in the market over the impact of the Dec. 5
EU Russia crude oil import ban and the G7 price cap," said Ann-Louise Hittle, vice president of
consultancy Wood Mackenzie.
Oil price special
coverage
 G7 and EU impose Russian oil price cap at $60 a barrel
 OPEC+ sticks to production cut target of 2 mln bpd
 More Chinese cities relax COVID-19 restrictions

"In addition, the producers’ group faces downside risk from the potential for weakening global
economic growth and China’s zero Covid policy."
The Group of Seven (G7) countries and Australia last week agreed on a $60 a barrel price cap on
seaborne Russian oil.
Business and manufacturing activity in China, the world's second-largest economy, have been hit
this year by strict measures to curb the spread of the coronavirus.
Persistent sluggishness in the Chinese economy could reverse oil's price gains, analysts warned.
"From the OPEC+ perspective, it can't be easy to make reliable forecasts against that backdrop and
the constantly evolving Covid situation in China, which currently looks far more promising from a
demand perspective," said Craig Erlam, senior markets analyst at OANDA.
Russia’s European Crude Sales Collapse Before Sanctions
European Union officials set Russian oil price cap at $60 a barrel
CNBC - Silvia Amaro@SILVIA_AMARO
KEY POINTS
 The announcement comes after the G-7 group of advanced economies agreed back in
September to impose a limit on Russian seaborne crude and therefore constrain revenues
the Kremlin makes from the commodity.

 However, details on how the cap would work in practice have been debated and hashed out
since that point.
The European Union on Friday agreed to cap Russian seaborne oil prices at $60 a barrel, after
several days of intense negotiations over an appropriate level.
The announcement comes after the G-7 group of advanced economies agreed in September to
impose a limit on Russian seaborne crude and therefore constrain revenues the Kremlin makes
from the commodity. However, details on how the cap would work in practice have been debated
and hashed out since that point.
Russia, amid its onslaught in Ukraine, has warned that an oil price cap could wreak havoc on the
energy markets and push commodity prices even higher.
The price limit will be reviewed regularly to monitor its market ramifications, but it should be “at least
5% below the average market price,” an EU document with details of the cap said.
Negotiations had been held up by Poland, with ministers in Warsaw scrutinizing but then agreeing
to the 5% adjustment mechanism. A formal announcement is expected Sunday.
EU energy chief urges China and India to support a price cap on Russian oil
Energy analysts have warned that the G-7 will need support from other major buyers if the cap is to
be effective. China and India, for instance, increased their purchases of Russian oil following the
invasion of Ukraine to benefit from discounted rates offered by Moscow.
Kadri Simson, European commissioner for energy, told CNBC in September that China and India
should support the measure. “It is unfair to pay excess revenues to Russia,” Simson said at the
time.
But there seems to be little appetite from these nations to comply with the cap. India’s petroleum
minister, Shri Hardeep S Puri, told CNBC in September he has a “moral duty” to his country’s
consumers. “We will buy oil from Russia, we will buy from wherever,” he added.

NewBase Specual Coverage
The Energy world –December -05 -2022
CLEAN ENERGY
US gas prices plunge as Americans get much-needed relief at
the pump ahead of the holidays
U.S. EIA, Gasoline and Diesel Fuel Update
Americans are paying less for gas than they did before Russia invaded Ukraine in February,
prompting gas prices to soar. After setting new records over the summer, the average price for a
gallon of gas dipped below $3.50 as demand slows around the world and fears of economic
shutdowns spread.
A gallon of regular gas is $3.47 on average, according to AAA. In fact, prices sank 12 cents since
last week and 29 cents since last month, AAA says.
Patrick De Haan, head of petroleum analysis at GasBuddy, says prices may keep going down and
could even fall below $3 by Christmas.
“In addition, 47 of the nation’s 50 states have seen diesel prices falling as well, providing well-
needed relief ahead of the holidays and helping to stem the rise in inflation,” he said in a blog post on
Monday.
US oil prices have fallen to their lowest level since December 2021 on concerns that protests in
China against Covid-19 lockdowns will dent demand.
West Texas Intermediate crude oil futures, the US benchmark, slid 2.7% on Monday to trade close
to $74 a barrel, a level last reached in December 2021. Futures for Brent crude, the global
benchmark, dropped 2.9% to trade close to $81 a barrel. That’s its lowest level since January.

Global oil prices have fallen about 35% since June as strict coronavirus restrictions in China have
kept demand weak, and as some of the world’s major economies have signaled they are heading
toward a recession.
That’s helped push down gasoline prices for American drivers.
The national average cost of a gallon of gas is now $3.55, down 0.3% from a day ago and by 5.7%
from last month, according to the AAA. Crude oil prices are the biggest driver of US gasoline prices,
according to the Energy Information Administration.
Thousands of protestors took to the streets across China over the weekend in a rare series of
demonstrations against the country’s zero-Covid strategy.
One of the triggers for the protest was a deadly apartment fire in the Xinjiang region. Videos of the
incident appeared to show lockdown measures had delayed firefighters from reaching the victims.
Global oil prices have fallen and recovered 4 days later as the OPEC+ group of major oil
producers slashing production by 2 million barrels per day starting this month, its biggest cut since
the start of the pandemic. OPEC+ is due to meet again on Sunday.
Falling fuel prices have spelled relief for millions of households and businesses worldwide who’ve
struggled to pay soaring energy bills since Russia invaded Ukraine in late February.
Russian price cap
The European Union on Friday agreed to cap Russian seaborne oil prices at $60 a barrel, after
several days of intense negotiations over an appropriate level.
The announcement comes after the G-7 group of advanced economies agreed in September to
impose a limit on Russian seaborne crude and therefore constrain revenues the Kremlin makes
from the commodity. However, details on how the cap would work in practice have been debated
and hashed out since that point.
But markets remain jittery as the West tries to agree a price cap on Russian oil. Major developed
economies are wrangling over the level of the cap, which is intended to limit Moscow’s revenues
without seriously disrupting global oil supply.
Media reports last week indicated that Russian oil could be capped at between $65 and $70 per
barrel, close to its current market price. Yet that level would inflict minimal pain on Russia.
But if Western powers decide to set the price lower, it could inflame the global energy crisis,
particularly if Russia retaliates. Moscow could decide to cut production by more than expected,
driving up prices and stoking global inflation.
“It’s looking increasingly likely to be done at a level that doesn’t particularly hinder Russia’s ability
to sell crude — which is contributing to the drop in oil prices — or put its buyers in an uncomfortable
position,” Craig Erlam, senior markets analyst at Oanda, wrote in a Monday note.

The price limit is due to take effect on December 5, the same day that the European Union’s
embargo on seaborne Russian crude oil imports comes into force.
Deutsche Bank analysts said Monday that they expected the EU embargo to create a “moderate
supply risk” between January and March next year, though the impact would likely be “blunted by
Russia’s self-interest in maximizing export revenue.”
West Coast gasoline prices have been volatile this year
Regular retail gasoline prices on the West Coast had substantial price swings this year, especially
in the fall. According to our Gasoline and Diesel Fuel Update, retail gasoline prices on the West
Coast averaged $5.82 per gallon (gal) in June, then decreased to average $4.94/gal in August,
before increasing to average $5.69/gal the week of October 3. By the week of November 28, 2022,
West Coast gasoline prices had fallen to $4.59/gal. This year’s gasoline price volatility reflects how
sensitive West Coast prices can be to relatively small changes in refinery output and import levels.
High retail gasoline price increases in the fall were specific to the West Coast. From September 19
to October 3, when prices on the West Coast rose by 84 cents per gallon, regular retail gasoline
prices decreased on the East Coast and U.S. Gulf Coast, and they increased by 20 cents/gal in the
Midwest.
Unique characteristics on the West Coast—particularly in California—influence the supply of
gasoline and may cause the West Coast to be more susceptible to wide price swings. The West
Coast is isolated by a lack of petroleum infrastructure connections to the rest of the United States.

In addition, California state regulators require a different gasoline formulation than the rest of the
country.
West Coast refineries generally must maintain steady production levels to ensure sufficient regional
supply to meet demand. Refinery outages can disrupt this balance and place pressure on West
Coast markets to meet demand by either drawing down local inventories or importing gasoline from
refineries in Asia.
Since 2020, West Coast refinery capacity has decreased, which in turn may have also made West
Coast gasoline prices more sensitive to supply changes. Notably, the Tesoro (Marathon) refinery in
Martinez, California, switched from refining traditional petroleum-based fuels to renewable diesel.
The conversion has reduced regional gasoline supply by 9%, or 161,000 barrels per day. This fall,
given less refinery capacity and a combination of planned and unplanned refinery outages, the West
Coast met demand with inventory draws.
West Coast gasoline inventories, however, were low from the beginning of August into September,
falling below the five-year (2017–21) average for those months.
The limited supply options associated with low inventories, less refining capacity, and few sources
to obtain gasoline that meets state specifications may have caused West Coast gasoline prices to
be more sensitive to refinery outages and changes in imports than normal.
Relatively high gasoline prices in September and early October corresponded with a period of
slightly less production by West Coast refineries and significantly reduced gasoline imports.
Gasoline prices fell in mid-October when refinery runs increased slightly and imports increased from
their lows in September.

In November, refinery runs increased further, contributing to West Coast gasoline inventories
increasing above the five-year average and the average retail gasoline price decreasing to its lowest
since February 28, 2022.
More ethanol was blended into U.S. gasoline last summer than ever before
Last summer, when the price of fuel ethanol was lower than the petroleum component of gasoline,
record amounts of ethanol were blended into the gasoline sold in the United States (blend rates).
The summer 2022 fuel ethanol blend rate from June through August reached 10.5%, the highest
blend rate calculated, based on our data going back to 2007.
Most of the gasoline now sold in the United States contains some ethanol. Ethanol blending in the
United States helps meet the requirements for reformulated gasoline (RFG) in the 1990 Clean Air
Act and the Renewable Fuel Standard set forth in the Energy Independence and Security Act of
2007.
Fuel ethanol’s price discount to gasoline was one factor that led to the higher summer blend rate in
2022. Although U.S. ethanol prices have increased during 2022, they have been smaller than the
gasoline price increases; last summer's gasoline price increase was greater than any summer since
2014. Gasoline prices increased because of tight domestic inventories and constraints on refining
capacity.
When factoring in the renewable identification number (RIN) credit for blending ethanol with
gasoline in the United States, ethanol’s discount to gasoline has been especially large. RINs are
the compliance mechanism used for the Renewable Fuel Standard (RFS) program administered by
the U.S. Environmental Protection Agency (EPA), and RINs have sold at near-record prices for
much of 2022.
Ethanol's large discount to gasoline drove higher fuel ethanol blend rates, such as E15 (a gasoline
blend of 15% ethanol) and E85 (a blend that contains between 51% and 83% fuel ethanol), which
were more attractive to consumers who wanted to take advantage of lower prices.

Typically, E15 cannot be sold at retail stations during the summer in states that do not have an RFG
program, a restriction that applies to about two-thirds of the country. This year, however, EPA issued
an emergency fuel waiver to allow E15 gasoline to be sold during the summer in all regions of the
United States.
All gasoline engine vehicles can use E10, but only flex-fuel and light-duty vehicles with a model year
of 2001 or newer are approved by the EPA to use E15.
In addition, E85 is becoming increasingly available in the United States. According to the U.S.
Department of Energy’s Alternative Fuels Data Center, the United States had 4,331 E85 fueling
stations as of January 2022, up 10% from the prior year.
In response to the high fuel ethanol blend rate into gasoline this past summer, we raised our forecast
for the average 2022 fuel ethanol blend rate from 10.3% to a record 10.4% in our November Short-
Term Energy Outlook.

NewBase Energy News 05 December 2022 - Issue No. 1571 call on +971504822502, UAE
The Editor:” Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced Twice a week and sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscriptions, please email us.
About: Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with over 30 years of experience in the Oil & Gas
sector. Has Mechanical Engineering BSc. & MSc. Degrees from leading U.S.
Universities. Currently working as self leading external Energy consultant for the GCC
area via many leading Energy Services companies. Khaled is the Founder of the
NewBase Energy news articles issues, Khaled is an international consultant, advisor,
ecopreneur and journalist with expertise in Gas & Oil pipeline Networks, waste
management, waste-to-energy, renewable energy, environment protection and
sustainable development. His geographical areas of focus include Middle East, Africa
and Asia. Khaled has successfully accomplished a wide range of projects in the areas
of Gas & Oil with extensive works on Gas Pipeline Network Facilities & gas compressor
stations. Executed projects in the designing & constructing of gas pipelines, gas
metering & regulating stations and in the engineering of gas/oil supply routes. Has drafted
& finalized many contracts/agreements in products sale, transportation, operation & maintenance
agreements. Along with many MOUs & JVs for organizations & governments authorities. Currently dealing
for biomass energy, biogas, waste-to-energy, recycling and waste management. He has participated in
numerous conferences and workshops as chairman, session chair, keynote speaker and panelist. Khaled is
the Editor-in-Chief of NewBase Energy News and is a professional environmental writer with over 1400
popular articles to his credit. He is proactively engaged in creating mass awareness on renewable energy,
waste management, plant Automation IA and environmental sustainability in different parts of the world.
Khaled has become a reference for many of the Oil & Gas Conferences and for many Energy program
broadcasted internationally, via GCC leading satellite Channels. Khaled can be reached at any time, see
contact details above.

NewBase 05-December-2022 Energy News issue - 1571 by Khaled Al Awadi_compressed.pdf

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