Oil refinery Motiva has closed its Port Arthur manufacturing complex, the largest U.S. oil refinery, due to icy temperatures.
“We are closely monitoring the weather conditions and will resume normal operations as soon as it is safe,” a Motiva spokesman said.
The long way back
The last time the price of oil in West Texas was above $ 60 was January 7, 2020. That was just when reports of coronavirus infections began to spread.
Only three months later, when the voyage came to a halt and the demand for oil fell to the floor, an unfavorable price war between Russia and Saudi Arabia led to a massive supply. On April 20, oil went negative for the first time, dropping to $ -40.32 and falling below zero the next day before bouncing back.
Since then, the outlook for oil has certainly improved: the U.S. economy grew at a record pace in the third quarter of 2020, and air travel reached pandemic records during Thanksgiving and Christmas.
Oil rose steadily until August, when it stayed close to $ 40 for several months. But since Election Day, oil has risen again, by 64%, as the outlook for economic stimulus and vaccines has increased.
Prices rise
The winter weather in Texas was another boost. US oil rose 1.1% to $ 60.12 on Monday. Brent crude, the global benchmark, rose 1.4% to $ 63.30 a barrel.
The higher oil prices could eventually cause gas prices, which have risen in recent months, to rise even higher. Although the two commodities are not directly correlated, oil is the primary component of gasoline and can trade the price of gas higher or lower.
According to AAA, a liter of gas rose to an average of $ 2.51 in the United States. This is 7 cents higher than a year ago and 14 cents higher than last month. Gas prices reached $ 1.77 per liter in April.
Speculation?
But the rebound in energy prices may not just be about the expectation that demand will return. The trip has bounced back, but it’s quite a bit compared to what it was before the pandemic, and it could take years to make business travel normal again. Commuter is likely to die forever for millions of workers who will continue to work from home long after Covid-19 is in the rearview mirror. And oil companies are betting big on a future dominated by green energy.
BP, Shell and Total have promised to reduce greenhouse gas emissions from their own operations to net zero by 2050, and their CEOs spoke about the urgent need to develop new businesses to compensate for the reduced demand for oil. Exxon has announced that it will invest $ 3 billion in technologies that will reduce emissions by 2025. And President Joe Biden has made the fight against climate change a top priority. He announced that on his first day in office in Paris, the United States would rejoin and quickly cease new oil and gas leases on federal lands.
Although the demand for oil may eventually bounce back – perhaps for years – all the factors that weigh on fossil fuels may indicate that much of the oil’s bounce may be part of the bubble that the massive run-up to stocks, other commodities and digital currencies as bitcoin boosts.
Only time will tell to determine how much room oil is left to run. Meanwhile, investors are happy, and managers may be paying more at the pump.
– CNN Business’ Julia Horowitz and Alison Kosik contributed to this report
