Why Europe Losing Saudi Oil Could Become America’s Problem

European refiners are turning to American crude and diesel just as the United States holds its lowest level of emergency oil reserves in more than 40 years.

Saudi Aramco told at least two European refiners on Friday that they will receive no crude in October under long-term contracts, Bloomberg reported, citing people informed of the decision. The decision applies to all European buyers, the anonymous sources said.

Aramco has not publicly confirmed the report and declined to comment to the Daily Caller News Foundation. European refiners will turn to American crude to replace part of those barrels, six energy analysts told the DCNF — and at least one expects them to bid for American diesel and gasoline as well.

The Strategic Petroleum Reserve held 285 million barrels in the week ending Sept. 11, its lowest level since 1982, according to the Energy Information Administration’s weekly report. The reserve has fallen about 130 million barrels since the week before the Iran war began, the DCNF reported Sept. 3, citing EIA data. American refineries ran at 96.8% of capacity in the week ending Sept. 11, and distillate stocks, which include diesel, stood 13% below the five-year average, the agency said.

The emergency release from the reserve that began in March has ended, so European demand for American crude “will also push crude oil prices higher,” Ellen Wald, a nonresident senior fellow at the Atlantic Council’s Global Energy Center and author of Saudi, Inc., told the DCNF.

European refiners will look to replace September and October supplies with other crude or with gasoline and diesel, and the easiest sources are the United States or Africa, Wald added.

“U.S. products markets are already very tight, so any additional demand for U.S. gasoline or diesel will put upward pressure on prices,” she said.

American prices move with the world market either way, Andrew Lipow, president of Lipow Oil Associates, told the DCNF in a Friday interview. They are “set by the global benchmarks, whether it’s WTI or Brent,” he said, and the pipeline closure “is limiting the availability of oil to the market around the world,” so “whether people are buying oil from the United States or oil from South America, it’s still going to impact price.”

American drivers should not see much change so long as exports are matched by new production, Caleb Jasso, a senior policy adviser at the Institute for Energy Research, told the DCNF. “Since oil prices are tied to global production, not just domestic production, a country can’t fully isolate itself from price fluctuations.”