US oil refineries race against dwindling supply
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What headlines does the FT News Briefing introduce at the start of the episode?
Good morning from the Financial Times. Today is Thursday, July 23rd, and this is your FT News Briefing. Tesla had a rough second quarter, and U.S. oil refiners are trying to keep up with demand. Plus, Deutsche Bank got hit with another raid yesterday.
Every time the bank thinks that they can look into the future, something from the past pops up. And the question is, when will this actually stop?
I'm Marc Filippino, and here's the news you need to start your day.
Tesla is not doing so hot. The company's profits dropped unexpectedly in the second quarter, even though demand for its electric vehicles was up, especially in Europe.
Why did Tesla report falling profits and its first cash burn in over two years?
Sales in the U.S. remain low after the Trump administration scrapped incentives for electric vehicles, forcing Tesla to sell its cars at lower prices. The company has also lost a crucial source of income from selling regulatory credits to other carmakers to offset their emissions. In addition, Tesla reported its first cash burn since early 2024. It recorded $1.1 billion in negative free cash flow. Tesla's capital expenditures more than doubled as it pivots from electric vehicles to semiconductors and humanoid robots. Its share price dropped in after-hours trading.
U.S. refineries are working fast to get the U.S. and international markets products like gasoline, jet fuel, and diesel.
How are US oil refineries responding to dwindling global fuel supplies?
The demand for oil and fuel has surged since tensions escalated again between the U.S. and Iran. But the U.S. is nearing the end of its capacity to take from strategic petroleum reserves. This sets the stage for a potential rise in prices of both oil and refined products. Joining me now to discuss this is Stephanie Finley, the FT's correspondent in Houston. Hi, Steph. Hi. Hi, how's it going? I'm doing well.
How depleted are US strategic petroleum reserves and what are the risks?
So just how depleted is the U.S. inventory of crude oil right now?
Well, the U.S. strategic petroleum reserves are now down to around 300 million barrels. By the time it hits 200 million barrels, the reserve will hit its operational minimums, which means you can't take more out. Otherwise, you risk damaging the integrity of of the caverns, which are actually salt caverns in Texas and Louisiana. So the U.S. has drawn down its reserves. Those reserves aren't infinite.
What production choices are US refiners making and what vulnerabilities do they create?
And with that, we're looking at a further tightening of the oil market once those reserves can no longer be drawn from.
And what does it mean for the U.S. economy if these stockpiles stay depleted?
If the stockpiles stay depleted, then there's no longer a mechanism to cushion the crude prices. Crude oil is one of the biggest inputs into gasoline prices, which are already at record highs as a result of the war. And we could see that further adding pressure on those prices. And so we'll expect to see higher crude prices, which will transfer into higher gas prices, which will add inflation into the US economy.
So I mentioned U.S. refiners. What are they doing to try and meet the demand for things like jet fuel and gasoline and diesel, given the state of the strategic petroleum reserves?
We're seeing oil refineries in the U.S. step up to try and meet that demand from the global market. The refineries in the Midwest and the Rockies are actually running at over 100% capacity to try and make up for the shortfall. Some of them have even deferred maintenance, which opens the door for breakdowns. And also with the refineries running so hot, there could be big disruption if something like a natural disaster, like a hurricane happens, which would spread into the global market and raise prices of the refined products like gas, jet fuel, and diesel.
I guess the question that I have, Steph, is are these refineries producing enough to make a difference?
There is still a shortfall. Renewed hostilities between Washington and Tehran have choked supplies after the ceasefire has broken down. We've seen Ukrainian drone strikes on Russian infrastructure also damage their refining capacity. So this has put more pressure on U.S.
Can US refinery output fully plug the global shortfall caused by Middle East and Ukraine conflicts?
oil refiners to produce. The U.S. is producing a lot, but it's not enough to make up for that shortfall or make up for the shortfall coming out of Asia where refiners have been starved of oil in order to produce the products.
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Chapters
8 chapters
1
What headlines does the FT News Briefing introduce at the start of the episode?
0:02–0:52
2
Why did Tesla report falling profits and its first cash burn in over two years?
0:52–1:40
3
How are US oil refineries responding to dwindling global fuel supplies?
1:40–2:02
4
How depleted are US strategic petroleum reserves and what are the risks?
2:02–2:35
5
What production choices are US refiners making and what vulnerabilities do they create?
2:35–4:29
6
Can US refinery output fully plug the global shortfall caused by Middle East and Ukraine conflicts?
4:29–5:52
7
Why has Deutsche Bank been raided three times this year and what are the investigations about?
5:52–8:24
8
What other notable stories close the episode, including UK inflation and a bionic eye approval?
8:24–10:48