Trade Wars and Tariffs

#6,126
#6,126
MontyPython said:
Nope. Never said all tariffs are bad. Some definitely make sense. Trumps approach unfortunately does not.
Click to expand...

Fair enough. I agree that Trump's tariffs have been bad for a variety of reasons:

1. Quick Application/Withdrawal and impact to long-term order/trade
2. Targeting wrong nations sometimes and too many nations all at once. A smaller set point and focus would be helpful. I really think we should only be hitting the low labor nations: China, India, Southeast Asia
3. Tariffs on goods you can't acquire in USA market (nor will ever be able to require) are downright stupid
 
  • Like
Reactions: MontyPython
#6,128
#6,128
Vol423 said:
Clearly unconstitutional. There is a provision in the Constitution directly forbidding taxation of exports. It won't end up happening.
Click to expand...
I see no way it can stick. However right as it was being announced the hosts on The Big Money Show on Fox Business were falling all over themselves commenting on how shrewd it was. They for some reason didn’t dwell as much on the most recent 90 day delay on China tariffs 😂
 
  • Like
Reactions: BernardKingGOAT
#6,129
#6,129
GroverCleveland said:
What is moving the needle the most is a scale on the graph that represents seven points out of 100.

Did it move down? Yep. But barely a tick.
Click to expand...

I see the graph scale graphically exaggerating the drop, and that's a great point. Going back to my question...what are your thoughts on the actual root cause(s) of the decline?
 
#6,130
#6,130
tbh said:
I see the graph scale graphically exaggerating the drop, and that's a great point. Going back to my question...what are your thoughts on the actual root cause(s) of the decline?
Click to expand...
As small as it is at this point, is it possible to even identify causes? That may change, but not enough data at this point for me.
 
  • Like
Reactions: tbh
#6,131
#6,131
NorthDallas40 said:
I see no way it can stick. However right as it was being announced the hosts on The Big Money Show on Fox Business were falling all over themselves commenting on how shrewd it was. They for some reason didn’t dwell as much on the most recent 90 day delay on China tariffs 😂
Click to expand...
It's shrewdly illegal, and any shareholder for NVidia or AMD can litigate it. Zero chance it sticks.
 
  • Like
Reactions: NorthDallas40
#6,133
#6,133
Vol423 said:
It's shrewdly illegal, and any shareholder for NVidia or AMD can litigate it. Zero chance it sticks.
Click to expand...
IF Trump were savvy there are probably ways to word things to get around it. but I seriously doubt he is.

Like call it a "user fee", or call it some green initiative carbon tax where you aren't taxing the actual item or the explicit exporting of it. or you know, just have them make donations equalling 15% to the Big Guy Cheeto.
 
#6,135
#6,135
LouderVol said:
IF Trump were savvy there are probably ways to word things to get around it. but I seriously doubt he is.

Like call it a "user fee", or call it some green initiative carbon tax where you aren't taxing the actual item or the explicit exporting of it. or you know, just have them make donations equalling 15% to the Big Guy Cheeto.
Click to expand...
Yeah. User fees on exports have already been specifically shot down by the courts also. They look past the wording on this issue and instead look at the end result. There is zero chance Trump would ever call something a carbon tax. However, that wouldn’t fly either. It’s a tax, and you can’t tax exports.
 
#6,136
#6,136
Vol423 said:
Yeah. User fees on exports have already been specifically shot down by the courts also. They look past the wording on this issue and instead look at the end result. There is zero chance Trump would ever call something a carbon tax. However, that wouldn’t fly either. It’s a tax, and you can’t tax exports.
Click to expand...
with a friendly Congress there absolutely is.

we have endured far worse than taxes on exports in my life time. I don't think that would even crack the top 10 oversteps in my life.
 
#6,137
#6,137
LouderVol said:
with a friendly Congress there absolutely is.

we have endured far worse than taxes on exports in my life time. I don't think that would even crack the top 10 oversteps in my life.
Click to expand...
You don’t seem to be getting it. Taxes on exports are specifically forbidden in the Constitution, and the courts have interpreted that repeatedly very broadly to include basically any monetary payment connected to exports. Congress is irrelevant In this instance.
 
#6,138
#6,138
Peter Navarro - the architect of Trump's tariffs - is a donkey.

There is no specific, publicly available survey or data that precisely quantifies the percentage of American economists who agree with Peter Navarro’s tariff policies as of August 13, 2025. However, multiple sources indicate broad disagreement among economists with Navarro’s claims, particularly his assertion that tariffs act as tax cuts, create jobs, and have minimal negative impact on consumers.

For instance, economists like Şebnem Kalemli-Özcan from Brown University have stated that research shows consumers ultimately bear the cost of tariffs, a view described as a near-consensus among economists. Similarly, Mark Zandi of Moody’s has called Navarro’s revenue projections of $600–$700 billion annually “not even in the realm of possibility,” estimating a much lower revenue range. The Tax Policy Center, Tax Foundation, and other analyses project significantly lower tariff revenues and highlight negative economic effects, like reduced GDP and consumer price increases, contradicting Navarro’s optimistic claims. Conservative economists like Art Laffer and Jessica Riedl, as well as institutions like the Yale Budget Lab and Penn Wharton Budget Model, also dispute Navarro’s projections, emphasizing higher consumer costs and economic disruption.[](https://www.mediaite.com/media/tv/tariffs-are-tax-cuts-top-trump-trade-official-peter-navarro-doubles-down-on-wild-argument-disputed-by-scores-of-economists/)[](https://www.nbcnewyork.com/news/business/money-report/tariffs-will-likely-raise-much-less-money-than-white-house-projects-economists-say/6208400/)[](https://www.factcheck.org/2025/04/independent-analyses-contradict-navarros-6-trillion-plus-tariff-revenue-estimate/)

While no exact percentage is provided, the consistent criticism from mainstream, conservative, and nonpartisan economists suggests that agreement with Navarro’s tariff policy is likely very low, potentially in the single digits, given the near-universal acknowledgment among economists that tariffs increase consumer costs and risk economic downsides. For a precise percentage, a targeted survey of economists would be needed, but no such data is referenced in available sources.
 
#6,140
#6,140
I havent seen anyone recently complain about inflation, yet Trump has got several of yall wanting higher interest rates..that is messed up. Cause Trump.

1755124636709.jpeg
 
#6,142
#6,142


Jae Kim
@JaeKim1089208
"Other notable increases include jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). Trade services margins increased 2.0%, and machinery/equipment wholesaling rose 3.8%.Some categories like fresh fruits and melons fell 5.9%, and gasoline prices declined by 1.8%."

GROK:

The Producer Price Index (PPI) data released on August 14, 2025, indicates significant month-over-month increases in jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). These fuels, all petroleum-based distillates, share similar production processes and market influences, and their price spikes in the PPI reflect a combination of supply, demand, and external factors. Below, I outline the primary reasons for these increases, drawing on the PPI context and broader market trends:
  1. Crude Oil Price Fluctuations:
    • Jet fuel, No. 2 diesel, and home heating oil are derived from crude oil, and their prices are heavily influenced by crude oil market dynamics. While some forecasts suggest Brent crude oil prices averaged $74 per barrel in September 2024, recent geopolitical tensions or supply chain disruptions may have driven short-term crude oil price spikes by August 2025, impacting the PPI. For instance, the Russia-Ukraine conflict has disrupted global oil supplies since 2022, and any escalation or new sanctions could tighten supply further, pushing up distillate prices.

  2. Refinery Constraints and Reduced Distillate Supply:
    • Global refinery closures, such as those expected in Europe (e.g., Scotland’s Grangemouth) and the U.S. (e.g., Phillips 66’s Los Angeles refinery), are reducing distillate production capacity by about 1 million barrels per day in 2025. Since jet fuel, diesel, and heating oil are produced together in the refining process, lower refinery output directly reduces supply, driving up producer prices as reflected in the PPI. New refining capacity in Asia may not fully offset this due to regional demand differences.

  3. Surging Jet Fuel Demand:
    • The PPI’s jet fuel price increase (+12.5%) aligns with strong global demand for air travel, which has returned to pre-pandemic levels and is projected to grow by 300,000 barrels per day in 2025, particularly in Western Europe and China. Refiners are prioritizing jet fuel production to meet this demand, which can strain supplies of other distillates like diesel and heating oil, contributing to their price increases (+11.8% and +14.9%, respectively). Limited adoption of sustainable aviation fuel (SAF), which is costly and constitutes only 0.7% of jet fuel production, keeps reliance on traditional jet fuel high, supporting price hikes.

  4. Seasonal Heating Oil Demand and Regional Factors:
    • The +14.9% increase in home heating oil and distillates in the PPI likely reflects seasonal demand as winter approaches, particularly in the Northeast U.S., where over 80% of heating oil consumption occurs. No. 2 diesel and home heating oil are chemically similar, so heightened heating oil demand can also push diesel prices up, as seen in the +11.8% PPI increase. Regional supply constraints, such as limited pipeline capacity or low inventories, may amplify these price spikes.



  5. Geopolitical and Regulatory Pressures:
    • Geopolitical events, such as OPEC+ decisions to delay production increases (e.g., until December 2024) or U.S. oil exports to support allies amid sanctions on Russian oil, have tightened global distillate supplies, impacting producer prices. Additionally, regulatory pressures like carbon pricing in the U.S. (e.g., the Regional Greenhouse Gas Initiative) and high diesel taxes in states like California (96.32 cents per gallon) increase production and distribution costs, which are passed on to producers and reflected in the PPI.

  6. Market-Specific PPI Dynamics:
    • The PPI measures prices received by domestic producers at the first commercial transaction, so the reported increases (jet fuel +12.5%, heating oil/distillates +14.9%, diesel +11.8%) may reflect short-term market tightness or higher refining margins in August 2025. For comparison, a prior PPI report from August 2023 noted similar spikes in distillate prices driven by gasoline and diesel price surges, suggesting recurring seasonal or supply-driven patterns.

Summary: The PPI increases for jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%) on August 14, 2025, are driven by a combination of rising crude oil prices, reduced refinery output, strong jet fuel demand from air travel recovery, seasonal heating oil demand in the Northeast, and geopolitical/regulatory pressures tightening supply and raising costs. These factors have converged to create supply-demand imbalances, pushing up producer prices for these closely related distillates.

The 38.9% MoM spike in fresh and dry vegetables stems from extreme heatwaves and droughts in key US regions like California, causing crop damage, reduced yields, and supply shortages.
 
#6,143
#6,143
jmacvols1 said:


Jae Kim
@JaeKim1089208
"Other notable increases include jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). Trade services margins increased 2.0%, and machinery/equipment wholesaling rose 3.8%.Some categories like fresh fruits and melons fell 5.9%, and gasoline prices declined by 1.8%."

GROK:

The Producer Price Index (PPI) data released on August 14, 2025, indicates significant month-over-month increases in jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). These fuels, all petroleum-based distillates, share similar production processes and market influences, and their price spikes in the PPI reflect a combination of supply, demand, and external factors. Below, I outline the primary reasons for these increases, drawing on the PPI context and broader market trends:
  1. Crude Oil Price Fluctuations:
    • Jet fuel, No. 2 diesel, and home heating oil are derived from crude oil, and their prices are heavily influenced by crude oil market dynamics. While some forecasts suggest Brent crude oil prices averaged $74 per barrel in September 2024, recent geopolitical tensions or supply chain disruptions may have driven short-term crude oil price spikes by August 2025, impacting the PPI. For instance, the Russia-Ukraine conflict has disrupted global oil supplies since 2022, and any escalation or new sanctions could tighten supply further, pushing up distillate prices.
  2. Refinery Constraints and Reduced Distillate Supply:
    • Global refinery closures, such as those expected in Europe (e.g., Scotland’s Grangemouth) and the U.S. (e.g., Phillips 66’s Los Angeles refinery), are reducing distillate production capacity by about 1 million barrels per day in 2025. Since jet fuel, diesel, and heating oil are produced together in the refining process, lower refinery output directly reduces supply, driving up producer prices as reflected in the PPI. New refining capacity in Asia may not fully offset this due to regional demand differences.
  3. Surging Jet Fuel Demand:
    • The PPI’s jet fuel price increase (+12.5%) aligns with strong global demand for air travel, which has returned to pre-pandemic levels and is projected to grow by 300,000 barrels per day in 2025, particularly in Western Europe and China. Refiners are prioritizing jet fuel production to meet this demand, which can strain supplies of other distillates like diesel and heating oil, contributing to their price increases (+11.8% and +14.9%, respectively). Limited adoption of sustainable aviation fuel (SAF), which is costly and constitutes only 0.7% of jet fuel production, keeps reliance on traditional jet fuel high, supporting price hikes.
  4. Seasonal Heating Oil Demand and Regional Factors:
    • The +14.9% increase in home heating oil and distillates in the PPI likely reflects seasonal demand as winter approaches, particularly in the Northeast U.S., where over 80% of heating oil consumption occurs. No. 2 diesel and home heating oil are chemically similar, so heightened heating oil demand can also push diesel prices up, as seen in the +11.8% PPI increase. Regional supply constraints, such as limited pipeline capacity or low inventories, may amplify these price spikes.

  5. Geopolitical and Regulatory Pressures:
    • Geopolitical events, such as OPEC+ decisions to delay production increases (e.g., until December 2024) or U.S. oil exports to support allies amid sanctions on Russian oil, have tightened global distillate supplies, impacting producer prices. Additionally, regulatory pressures like carbon pricing in the U.S. (e.g., the Regional Greenhouse Gas Initiative) and high diesel taxes in states like California (96.32 cents per gallon) increase production and distribution costs, which are passed on to producers and reflected in the PPI.
  6. Market-Specific PPI Dynamics:
    • The PPI measures prices received by domestic producers at the first commercial transaction, so the reported increases (jet fuel +12.5%, heating oil/distillates +14.9%, diesel +11.8%) may reflect short-term market tightness or higher refining margins in August 2025. For comparison, a prior PPI report from August 2023 noted similar spikes in distillate prices driven by gasoline and diesel price surges, suggesting recurring seasonal or supply-driven patterns.
Summary: The PPI increases for jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%) on August 14, 2025, are driven by a combination of rising crude oil prices, reduced refinery output, strong jet fuel demand from air travel recovery, seasonal heating oil demand in the Northeast, and geopolitical/regulatory pressures tightening supply and raising costs. These factors have converged to create supply-demand imbalances, pushing up producer prices for these closely related distillates.

The 38.9% MoM spike in fresh and dry vegetables stems from extreme heatwaves and droughts in key US regions like California, causing crop damage, reduced yields, and supply shortages.
Click to expand...

Pace yourself it’s entirely likely you’re going to be offering deflections and excuses on why inflation is heating up for a few months.

1755178977568.gif
 
Last edited:
#6,144
#6,144
jmacvols1 said:


Jae Kim
@JaeKim1089208
"Other notable increases include jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). Trade services margins increased 2.0%, and machinery/equipment wholesaling rose 3.8%.Some categories like fresh fruits and melons fell 5.9%, and gasoline prices declined by 1.8%."

GROK:

The Producer Price Index (PPI) data released on August 14, 2025, indicates significant month-over-month increases in jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%). These fuels, all petroleum-based distillates, share similar production processes and market influences, and their price spikes in the PPI reflect a combination of supply, demand, and external factors. Below, I outline the primary reasons for these increases, drawing on the PPI context and broader market trends:
  1. Crude Oil Price Fluctuations:
    • Jet fuel, No. 2 diesel, and home heating oil are derived from crude oil, and their prices are heavily influenced by crude oil market dynamics. While some forecasts suggest Brent crude oil prices averaged $74 per barrel in September 2024, recent geopolitical tensions or supply chain disruptions may have driven short-term crude oil price spikes by August 2025, impacting the PPI. For instance, the Russia-Ukraine conflict has disrupted global oil supplies since 2022, and any escalation or new sanctions could tighten supply further, pushing up distillate prices.
  2. Refinery Constraints and Reduced Distillate Supply:
    • Global refinery closures, such as those expected in Europe (e.g., Scotland’s Grangemouth) and the U.S. (e.g., Phillips 66’s Los Angeles refinery), are reducing distillate production capacity by about 1 million barrels per day in 2025. Since jet fuel, diesel, and heating oil are produced together in the refining process, lower refinery output directly reduces supply, driving up producer prices as reflected in the PPI. New refining capacity in Asia may not fully offset this due to regional demand differences.
  3. Surging Jet Fuel Demand:
    • The PPI’s jet fuel price increase (+12.5%) aligns with strong global demand for air travel, which has returned to pre-pandemic levels and is projected to grow by 300,000 barrels per day in 2025, particularly in Western Europe and China. Refiners are prioritizing jet fuel production to meet this demand, which can strain supplies of other distillates like diesel and heating oil, contributing to their price increases (+11.8% and +14.9%, respectively). Limited adoption of sustainable aviation fuel (SAF), which is costly and constitutes only 0.7% of jet fuel production, keeps reliance on traditional jet fuel high, supporting price hikes.
  4. Seasonal Heating Oil Demand and Regional Factors:
    • The +14.9% increase in home heating oil and distillates in the PPI likely reflects seasonal demand as winter approaches, particularly in the Northeast U.S., where over 80% of heating oil consumption occurs. No. 2 diesel and home heating oil are chemically similar, so heightened heating oil demand can also push diesel prices up, as seen in the +11.8% PPI increase. Regional supply constraints, such as limited pipeline capacity or low inventories, may amplify these price spikes.


  5. Geopolitical and Regulatory Pressures:
    • Geopolitical events, such as OPEC+ decisions to delay production increases (e.g., until December 2024) or U.S. oil exports to support allies amid sanctions on Russian oil, have tightened global distillate supplies, impacting producer prices. Additionally, regulatory pressures like carbon pricing in the U.S. (e.g., the Regional Greenhouse Gas Initiative) and high diesel taxes in states like California (96.32 cents per gallon) increase production and distribution costs, which are passed on to producers and reflected in the PPI.
  6. Market-Specific PPI Dynamics:
    • The PPI measures prices received by domestic producers at the first commercial transaction, so the reported increases (jet fuel +12.5%, heating oil/distillates +14.9%, diesel +11.8%) may reflect short-term market tightness or higher refining margins in August 2025. For comparison, a prior PPI report from August 2023 noted similar spikes in distillate prices driven by gasoline and diesel price surges, suggesting recurring seasonal or supply-driven patterns.
Summary: The PPI increases for jet fuel (+12.5%), home heating oil and distillates (+14.9%), and No. 2 diesel fuel (+11.8%) on August 14, 2025, are driven by a combination of rising crude oil prices, reduced refinery output, strong jet fuel demand from air travel recovery, seasonal heating oil demand in the Northeast, and geopolitical/regulatory pressures tightening supply and raising costs. These factors have converged to create supply-demand imbalances, pushing up producer prices for these closely related distillates.

The 38.9% MoM spike in fresh and dry vegetables stems from extreme heatwaves and droughts in key US regions like California, causing crop damage, reduced yields, and supply shortages.
Click to expand...

So the Jet fuel and heating oil increases are Gavin’s fault because the LA refinery closure
 
#6,145
#6,145
how much role did tarriffs play in 8/14/25 PPI report?


GROK:

"The Producer Price Index (PPI) report for July 2025, released on August 14, 2025, showed a significant increase of 0.9% in final demand prices, with services rising 1.1% and goods increasing 0.7%. However, the specific role of tariffs in driving this increase is not directly quantified in the available data. Tariffs, particularly those implemented by the United States and retaliatory measures from other countries, have been noted as a concern for markets and the Federal Reserve, as they can increase costs, disrupt supply chains, and affect market competitiveness. Despite these concerns, the PPI report itself does not explicitly attribute the 0.9% rise to tariffs. Instead, the increase was primarily driven by a 1.1% surge in final demand services, with notable contributions from trade margins (wholesale and retail) and general services costs. For example, prices for communication and related equipment rose 0.8%, and portfolio management services increased 2.2%, while energy goods like gasoline also saw a 0.6% uptick.

Posts on X and some analyses suggest that tariffs could be contributing to inflationary pressures by raising import costs, which may pass through to producer prices. For instance, one post indicated that the July PPI jump could signal an accelerating pass-through from import costs to consumer prices in the coming months. However, the June 2025 PPI report, which showed no change (0.0%), suggested that producer prices were trending below the Fed’s 2% inflation target, implying that tariff impacts might not have been dominant in the prior month.

Given the lack of explicit data isolating tariffs' impact in the July 2025 PPI report, it’s reasonable to infer that tariffs likely played a role in the goods sector (e.g., through higher input costs for imported materials), but the primary driver appears to be services, particularly trade margins and sectors like portfolio management. The broader context of tariff actions initiated in 2025, as noted by Congressional reports, suggests an ongoing influence on costs, but no precise percentage or contribution to the PPI increase is specified."
 
#6,146
#6,146
jmacvols1 said:
how much role did tarriffs play in 8/14/25 PPI report?


GROK:

"The Producer Price Index (PPI) report for July 2025, released on August 14, 2025, showed a significant increase of 0.9% in final demand prices, with services rising 1.1% and goods increasing 0.7%. However, the specific role of tariffs in driving this increase is not directly quantified in the available data. Tariffs, particularly those implemented by the United States and retaliatory measures from other countries, have been noted as a concern for markets and the Federal Reserve, as they can increase costs, disrupt supply chains, and affect market competitiveness. Despite these concerns, the PPI report itself does not explicitly attribute the 0.9% rise to tariffs. Instead, the increase was primarily driven by a 1.1% surge in final demand services, with notable contributions from trade margins (wholesale and retail) and general services costs. For example, prices for communication and related equipment rose 0.8%, and portfolio management services increased 2.2%, while energy goods like gasoline also saw a 0.6% uptick.

Posts on X and some analyses suggest that tariffs could be contributing to inflationary pressures by raising import costs, which may pass through to producer prices. For instance, one post indicated that the July PPI jump could signal an accelerating pass-through from import costs to consumer prices in the coming months. However, the June 2025 PPI report, which showed no change (0.0%), suggested that producer prices were trending below the Fed’s 2% inflation target, implying that tariff impacts might not have been dominant in the prior month.

Given the lack of explicit data isolating tariffs' impact in the July 2025 PPI report, it’s reasonable to infer that tariffs likely played a role in the goods sector (e.g., through higher input costs for imported materials), but the primary driver appears to be services, particularly trade margins and sectors like portfolio management. The broader context of tariff actions initiated in 2025, as noted by Congressional reports, suggests an ongoing influence on costs, but no precise percentage or contribution to the PPI increase is specified."
Click to expand...
PPI is domestic production, lapdog. Imported finished goods don’t show up in the data. However imported assemblies and components used in domestic production do. PPI is also leading but not a guarantee for CPI

Much like you Grok is an idiot and patently wrong with this hot take. Pace yourself on the water carrying.
 
#6,147
#6,147
Wireless1 said:
So the Jet fuel and heating oil increases are Gavin’s fault because the LA refinery closure
Click to expand...
there is a post COVID surge in people flying and supply for jet fuel is not keeping up with demand and the closure of a refinery will only make problems worse. Biden's war on oil for 4 years will take time to recover from. There needs to be more refineries under construction to ease supply chain for various fuels. If jet fuel has to be imported tarriffs can/will effect the price.

the Dems fake climate crisis and war on oil has had a negative impact on refining of fuels and cost of distillates.


GROK:

The closure of Phillips 66’s Los Angeles-area refinery by the end of 2025, combined with other regional refinery shutdowns like Valero’s Benicia facility, is expected to exacerbate supply chain constraints for fuels, including jet fuel, in California and the broader West Coast. This raises the question of whether new refineries under construction could alleviate these pressures. Below, I’ll assess the need for new refineries to ease supply chain issues for various fuels, focusing on jet fuel in light of the Los Angeles refinery closure, and incorporate relevant context from the provided search results.Need for New Refineries to Ease Supply Chain Constraints
  1. Current Supply Chain Challenges:
    • Reduced Refining Capacity: The closure of Phillips 66’s Los Angeles refinery (139,000 barrels per day) and Valero’s Benicia refinery (145,000 barrels per day) will reduce California’s refining capacity by 17% by 2026, significantly impacting jet fuel, gasoline, and diesel supplies. The U.S. Energy Information Administration (EIA) projects that U.S. jet fuel consumption will reach an all-time high in 2026, while reduced refinery production will lower inventories, leading to tight supply and demand conditions.


    • Regional Isolation: California’s lack of pipeline connectivity to major U.S. refining hubs, like the Gulf Coast, means it relies heavily on in-state production or imports. Importing jet fuel from Asia (e.g., India, South Korea) is costlier due to transportation and longer lead times, contributing to price volatility.


    • Impact on Jet Fuel Prices: The Los Angeles refinery’s closure is expected to tighten jet fuel supply, potentially increasing prices, especially during high-demand periods. Historical gasoline price surges in California (e.g., $5/gallon for CARBOB in 2022–2023) suggest jet fuel could face similar price spikes.
  2. Global Refining Trends:
    • Limited New Construction in the U.S.: No new major refineries have been built in the U.S. in over 40 years, with the last one permitted under the Trump administration. Regulatory hurdles, high capital costs, and environmental pressures make new construction challenging.
    • Global Rebalancing: New refineries and expansions are underway globally, particularly in Asia and the Middle East, where mega-refineries are increasing capacity. For example, Hindustan Petroleum Corp’s Barmer refinery in India (9 million metric tonnes per annum) is set to be commissioned by December 2025. However, these projects are not located in regions like California, where supply chain issues are acute, requiring adaptation in fuel transport logistics.


    • Capacity vs. Demand: Global refining capacity was 103.5 million barrels per day in 2023, but demand for traditional fuels like jet fuel is expected to peak or plateau by 2030 as alternative energy sources grow. Despite this, jet fuel demand remains resilient compared to gasoline, suggesting a need for targeted capacity to meet short-term supply needs.

  3. Specific Need for Jet Fuel:
    • Jet fuel supply is particularly vulnerable due to rising consumption and limited production capacity post-closure. The EIA notes that reduced refinery output will deplete jet fuel inventories, exacerbating price pressures.


    • New refineries or expansions focused on jet fuel could stabilize supply, but the long lead times (3–5 years for construction) and high costs (billions of dollars) mean they won’t address immediate shortages caused by the 2025–2026 closures.
  4. Alternative Solutions:
    • Refinery Conversions: Rather than building new refineries, some companies are converting existing ones to produce renewable fuels like sustainable aviation fuel (SAF). For instance, Phillips 66’s Rodeo Renewable Energy Complex is shifting to SAF and renewable diesel, which could partially offset jet fuel supply losses. However, SAF production is still scaling and may not meet immediate demand.


    • Supply Chain Optimization: Enhancing transportation infrastructure, such as pipelines or LNG terminals, could reduce reliance on imports. For example, an LNG terminal could lower costs for refineries and improve supply chain resilience.


    • Imports and Existing Capacity: U.S. Gulf Coast expansions (e.g., 350,000 barrels per day of new capacity) could supply California via marine transport, but this faces logistical and cost barriers due to California’s isolation.
Relevance to PPI and Tariffs
  • The July 2025 PPI report, showing a 0.9% increase driven largely by services (1.1%) and goods (0.7%), does not directly link to the Los Angeles refinery closure, as it is yet to occur. However, tariffs on imported fuels or materials could exacerbate price pressures post-closure by increasing import costs, which are already a concern for jet fuel. The PPI data suggests rising costs in energy goods (e.g., gasoline up 0.6%), and tariffs could amplify this trend for jet fuel if imports rise to compensate for lost capacity.
Conclusion: There is a clear need for additional refining capacity to ease supply chain constraints for jet fuel and other fuels, particularly in California, where the Phillips 66 Los Angeles refinery closure will tighten supplies and likely increase prices by Q4 2025. However, building new refineries in the U.S. is unlikely due to regulatory, economic, and environmental barriers. Instead, global refinery expansions (e.g., in Asia), conversions to renewable fuels, and supply chain optimizations (e.g., improved transport or LNG terminals) are more feasible short-term solutions. These measures may not fully offset the immediate impact of the closure, suggesting jet fuel prices will face upward pressure unless import logistics improve or SAF production scales rapidly. For precise impacts on jet fuel prices, monitoring import trends and regional inventory data post-closure will be essential.
 
New posts
You must log in or register to reply here.
Advertisement

Back
Top