Americas have glut of heavy oil due to freight squeeze; Asia, Europe scramble for barrels
- Freight costs to move oil have quintupled, leaving heavy crude stranded in the Americas.
- US Gulf Coast refineries are running at 28-year highs and cannot process any more supply.
- Shipping a supertanker from the Gulf Coast to Asia now costs a staggering $80 million.
- Global market fractured as Asia and Europe face shortages while the Americas drown in excess.
Brief Summary
A massive bottleneck in global shipping has created a bizarre paradox: while the rest of the world screams for oil and prices soar above $100 a barrel, the Americas are sitting on a surplus of heavy crude they literally cannot afford to move. Because the cost of hiring a supertanker has skyrocketed—up to $80 million per trip—the heavy crude that usually fuels diesel production is piling up in storage. Even though US refineries are running at near-maximum capacity to capitalize on high demand, they have hit a physical limit on how much of this heavy sludge they can process, leaving the excess stranded.
Why This Matters
When shipping costs make it too expensive to move oil to the refineries that need it, the market efficiency that keeps fuel prices stable breaks down. You are seeing the result of this at the pump and in the cost of goods that rely on diesel for transport. Even though the supply exists, the massive price hike in logistics acts as a hidden tax, ensuring that fuel prices stay elevated because the crude is trapped in the wrong place. As long as tanker availability remains tight and shipping rates stay in the stratosphere, you should expect continued volatility in diesel and heating oil prices, regardless of how much oil is actually being pulled out of the ground.