U.S. oil refinery delays may spur supply crunch

NEW YORK (Reuters) – The stage is being set for a fuel supply crunch in the United States once the economy rebounds now that refiners have pushed back more than $10 billion worth of upgrades they had on the drawing board.

Pressured by the oil price collapse and the economic malaise, companies have also either slowed or scrapped expansions which could threaten 340,000 barrels per day of new capacity, spelling a return to lagging processing capability that helped push pump prices higher until last year.

“If the economy comes back faster than expected, we are going to be caught flat-footed and we’re going to see a big spike in prices,” said Phil Flynn, an analyst at Alaron Trading in Chicago.

Refining margins — the difference between the cost of crude oil and wholesale price of petroleum products like gasoline — have narrowed as fuel demand dwindled due to the economic meltdown, at times dropping into negative territory.

Reuters