Gas pump pain may outlast cheaper crude, columnists warn

A key fuel-market gauge has climbed to a record even as crude prices have swung with the U.S.-Iran conflict, according to a MarketWatch opinion column by Eric Pachman and Michael Scott Kinch.

The writers argue that drivers watching crude oil alone may miss the price pressure closer to the pump: the crack spread, the difference between what refiners pay for crude and what they make selling fuels such as gasoline and diesel.

According to Pachman and Kinch, that spread mostly ranged from $10 to $15 a barrel during much of the past decade. This week, they wrote, it reached $70, the widest level on record.

The column says the refining margin is now higher than the price of a barrel of crude when the war began. The authors say the spread kept rising during a drop in crude and continued rising after crude turned higher again.

Why crude alone does not tell the story

Pachman, founder of Data 4 the People and a former chemical engineer, and Kinch, a professor at Stony Brook University, say the problem starts with the fact that crude oil is not interchangeable.

Different oil fields produce different types of crude, and refineries are built to process certain grades more efficiently, the column says. The authors write that many large U.S. refineries were designed for heavy, sour crude from places including Canada, Venezuela, Mexico and the Persian Gulf.

The U.S. shale boom, they say, added more light, sweet crude, which those refineries do not use as efficiently. That is why, in their telling, the U.S. can export oil it produces while importing oil better suited to its refineries.

The column says the Strait of Hormuz disruption scrambled the tanker system that normally sends particular crude grades to the refineries best matched to process them. Reopening the strait moves barrels again, the authors write, but it does not instantly restore those matches.

They add that renewed fighting resets that process, keeping refineries under pressure even when crude supply resumes.

Reserves are being drawn down

The authors point to U.S. stockpiles as another warning sign. Since the war began, they write, total crude in storage, including the Strategic Petroleum Reserve, has fallen to about 726 million barrels.

That level is the lowest since 1984 and about 129 million barrels below where it stood at the start of the conflict, according to the column.

Pachman and Kinch say the emergency reserve has absorbed much of the decline and is now at a 43-year low. They also note that storage tanks require a minimum amount of oil for pumps to work, known in the industry as “tank bottoms.”

The column says government energy statisticians recently published an explainer on that term, while prices at one major U.S. oil hub suggested tanks may be nearing that lower limit.

A broader energy warning

The writers frame the issue as a longer-term U.S. policy problem. They say the U.S. banned crude exports after the 1973 oil crisis and lifted that ban in 2015.

Today, they write, the U.S. is exporting more oil than before, including about 3 million barrels a day more than a year earlier, while domestic reserves fall.

The column makes a similar argument about natural gas. Pachman and Kinch say demand is rising, with AI data centers accounting for about half of new U.S. electricity demand last year, while the U.S. ships record amounts of natural gas overseas.

They write that electricity prices paid by Americans are up almost 40%, while exporters’ shareholders have benefited from overseas sales.

The authors conclude that the Iran war is the immediate shock, while lower reserves, crude mismatches and grid strain are the longer tail. Their prescription is a national energy strategy aimed at U.S. consumers and security rather than short-term investor returns.

This story draws on original reporting from MarketWatch.