Governors Take Action As Energy Markets Navigate Volatility

Energy markets are seeing a wave of selling Tuesday, after Monday’s early gains were erased with optimism for diplomacy once again getting credit for the selling, even though the U.S. and Iran can’t even agree about what has or has not been offered.

Meanwhile, the UKMTO reports another vessel was struck while transiting the Strait of Hormuz overnight, sparking a fire onboard.

“I’m from the government, and I’m here to help.”

While “to ban, or not to ban” exports seems to be the raging debate on the federal level which continues to create big price swings with each headline, governors around the country are trying to pull whatever levers available to them in an effort to lower fuel prices and try to avoid being punished at the polls in November.

California’s governor ordered CARB to waive the remaining summer-gasoline requirements (as we predicted last week) allowing winter-grade fuels to be sold immediately rather than waiting until October 1. The remaining 6lb CARBOB grades had been trading for $1/gallon or more higher than other regions that have already transitioned to winter products, and now those shippers who pushed summer grade supply into the pipeline are going to feel the sting as their values evaporate.

Texas’s governor also got into the act Monday, waiving weight limits and TXLED diesel additive requirements, and suspending enforcement of dyed diesel usage restrictions within the state. The governor also asked the EPA to suspend ULSD requirements in an effort to ease prices. To summarize, based on the governors orders you can probably haul 9,000 gallons of diesel in Texas instead of 7,500 maximum, not use a TXLED additive and even use dyed fuel on the highways without getting in trouble. The rub is you still can’t sell dyed diesel for known highway use unless the EPA grants a waiver or you charge the on-road fuel taxes.

Alabama’s governor also eased dyed diesel restrictions last week, while several others (particularly in Ag states) are calling for a temporary export ban to limit the damage done by high prices during the harvest season. For more detail, you can see the letters from the governors attached.

The DOT also announced its “final” plans to roll back CAFÉ standards as had been announced last year. The latest update is in line with the expected average fuel economy just under 35mpg in 2031, down from the previous administration’s targets of more than 50mpg. To clarify, the new standards won’t mean cars can go back to the old days of gas guzzling, it means that the requirements to get more efficient are roughly cut in half.

Meanwhile, Russia’s President is also getting creative to try and fend off his country’s fuel crisis, issuing a decree that makes sharing data on the country’s refineries and fuel exports illegal.

Valero reported unplanned flaring at its 135mb/day Wilmington CA refinery Monday citing “Unplanned maintenance” for the upset according to an AQMD filing.