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Despite high gas prices, US refiners strain to meet summer demand



In spite of soaring gasoline prices, US refineries are not expected to boost supply significantly because of limited capacity
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Only time will tell how much record US prices at the pump will dent driving demand this summer, but don’t expect a significant increase in gasoline supply from American refineries.

The reason: Several US gasoline refineries have shut down in recent years, or been converted to make other fuels, crimping America’s refining capacity and exacerbating the hit from high crude oil prices in the current energy crunch.

US refineries operated at 93.2 percent last week, the loftiest level since December 2019 and an exceptionally high rate for a season normally associated with plant maintenance.

It all points to a stressed US energy system ahead of the summer driving season, which kicks off this weekend with the Memorial Day holiday.

“We’re set for failure,” said Robert Yawger an analyst at Mizuho Securities. “Basically, we’re set for high prices, increasing inflation, and it doesn’t bode well.”

But limited refining capacity is also a global problem, according to a note from the Eurasia Group that described a tight fuel market with little relief in site.

“Increased demand is outstripping both storage and production capacity, leading to shortages,” Eurasia Group said. 

“Right now, demand is drawing down that storage much faster than it can be replaced, depleting inventories and driving refined product prices higher. While International Energy Agency data from this week shows global refinery throughput capacity increasing, it still remains below pre-pandemic levels.”

Besides lifting crude prices, the Ukraine invasion has also pinched supplies of some refined products exported from Russia, especially low-quality gasoil. 

– Plants are converted, closed –

Gasoline prices in the United States have soared more than 70 percent in last year to record levels, nationally averaging about $4.60 per gallon. Analysts at JPMorgan Chase believe prices go higher still this summer, surpassing $6.00 a gallon.

The number of active US refineries has fallen 13 percent in the last decade and now stands at the lowest level in the modern era.

The list of closures includes the Philadelphia Energy Solutions plant, which had been the largest in the northeastern United States prior to being shuttered in June 2019 following an explosion.

This group includes some refineries that were suspended early in the pandemic as fuel demand sank. Some, such as Marathon Petroleum’s refinery in New Mexico, were never restarted.

The issue has “become a greater concern here in the United States as we’ve shut down a million barrels a day of refining capacity over the last year,” said Andy Lipow of Lipow Oil Associates.

Large US refineries have also been shifting some of their capacity to biofuels and other renewable fuels in light of policies to address climate change favored by investors who prioritize environmental, social and governance (ESG) goals. 

At its Cheyenne, Wyoming refinery, HollyFrontier is converting a 52,000 barrel a day refinery from gasoline production to renewable diesel.

– Dwindling market share –

But many in the oil industry are loath to undertake significant new refinery projects in light of the heavy investments by automakers like General Motors and Ford building electric vehicles that will lower gasoline’s market share as a transport fuel.

Major airlines have also pledged to use more renewable fuels, lowering demand for jet fuel, another product at petroleum refineries.

Experts also pointed to policies such as ban on the sale of new gasoline-fired cars after 2035 that is being considered by the European Union.

“Laws like that are a clear signal that demand for your product at some point is going to go down,” said Bill O’Grady of Confluence Investment Management. “There is very little incentive to invest.”

Building a new refinery requires extensive capital, years of planning and regulatory approvals and would not pay off for 10-20 years, said Richard Sweeney, a professor of economics and the economy at Boston College.

“Gas prices are very, very high and diesel prices are very, very high,” said Sweeney, adding, “I don’t think anyone thinks that’s going to last years.”

Many refiners are steering extra cash made from today’s strong market towards dividends and shareholder buybacks, which are favored on Wall Street.

The last major US refinery in the United States opened in 1977 and there have only been five new plants in the last 20 years, all smaller refineries.

When refiners have added significant capacity, it has been through expansions of existing plants rather than greenfield projects.

“No community wants a refinery,” said O’Grady. “They’re dirty. They explode. They smell bad.” 

The current global refining predicament is built on a “false assumption that we can do without refining,” said Phil Flynn of the Price Futures Group. 

“We’re going to have to balance our ESG dreams versus the reality of trying to keep the market supplied with the products.”

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Netflix ‘actively’ working on ad-supported subscription




It was revealed last month Netflix was planning to introduce a new cheaper subscription model by the end of 2022
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Netflix is “actively” working on building its cheaper, ad-supported deal, the company’s French team said on Tuesday, but added there was no clear timeline. 

It was revealed last month that the streaming platform was planning to introduce a new cheaper subscription model by the end of the year that would break its taboo on advertising. 

That leak to the New York Times followed news that Netflix had lost 200,000 subscribers in the first quarter of the year — its first decline in a decade. 

“We don’t have a precise timeline yet,” Anne-Gabrielle Dauba-Pantanacce, head of communications for Netflix France, told AFP. 

“We are actively working on it. It’s a priority — this idea of giving subscribers more options in the context of high inflation,” she added. 

Bloomberg reported over the weekend that Netflix has yet to appoint a head of advertising or build a sales team. 

The Wall Street Journal said Netflix is actively looking into partnerships with Google and Comcast to provide ads. 

There are also tricky questions about where to place the ads. 

Should they come only at the start of programming? Or will their teams have to go back through countless hours of content to find suitable moments for an ad break in shows like “Stranger Things” that were never created with ads in mind? 

“For now, nothing is decided,” said Dauba-Pantanacce. 

In its bid to rake in more cash, Netflix is also looking to crackdown on users who share their passwords with others. 

Despite losing subscribers, which led to a tumble in its share price, Netflix remains by far the most popular streaming service in the world with 222 million subscribers. 

But they are shared with an estimated 100 million other households that are not paying for the service. 

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Party’s over: Airbnb bans events permanently




Airbnb says its permanently banned parties
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Airbnb has made permanent its pandemic-era prohibition of parties at the properties rented out globally through its app, saying Tuesday the rules have been effective against problematic events.

The rental platform has gradually tightened its policies on parties after complaints and some high-profile trouble, including a 2019 shooting that killed five in California.

Airbnb provisionally barred events in 2020 as a measure against the spread of Covid, but it turned out to also be effective against large or disruptive gatherings.

“Over time, the party ban became much more than a public health measure. It developed into a bedrock community policy,” the company said.

In the past, property owners were given the room to use their best judgment on whether to allow parties, but rules tightened to bar “party houses” as well as large events advertised on social media.

After the pandemic hit, bringing the closure of many nightlife venues, people in some cases turned to hosting events at places rented through Airbnb, which in turn became a problem.

But Airbnb argued the tighter rules have been effective in reducing the rate of rowdiness complaints it has received.

Under the new policy Airbnb will also lift its 16-person cap at rental properties, a rule enacted against Covid but which will now take into account that certain larger or outdoor sites are OK for bigger groups. 

The company said people breaking the rules face consequences from account suspension to full removal from the platform, adding that in 2021, over 6,600 guests were suspended over the party ban.

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South Africa’s Eskom announces further power cuts




Power cuts are a major source of frustration in South Africa, where protests broke out near Eskom's offices last year
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South Africa, a country plagued by power shortages, on Tuesday imposed the the toughest electricity rationing in two and a half years after labour disputes disrupted production at several plants.

Power rationing to consumers was ramped up to so-called Stage 6 load-shedding to prevent countrywide blackouts.

Stage 6 means that South Africans will now experience multiple cuts per day, each lasting several hours.

Africa’s leading industrialised country last experienced such drastic outages in December 2019. 

“There is a high risk that the stage of load-shedding may have to change at any time, depending on the state of the plant,” power utility Eskom said in a statement.  

Power cuts are a major source of frustration and discontent in South Africa, where protests broke out near Eskom’s offices last year.

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