1986-1990
Major Factors
- Rising crude oil prices (+)
- Light product markets strong (+)
- Slight decline in residual fuel demand with increasing production (+)
- Slight increase in bottoms conversion capacity (0 to -)
Notes:
- A tightening crude market with rising crude oil prices contributed to the expansion of
the differential in the late 1980’s. Light crude oil prices were rising faster than
the heavy oil prices.
- The economy was strong, and light product prices were improving, tending to move the
crude price differential up.
- Residual oil demand had been falling rapidly since the crude oil price increase in 1979,
but the decline almost stopped after the crude oil price collapse in 1986. However,
“inadvertent” production of residual fuel oil increased as crude input to
refineries increased to meet growing demand for light products, and the net result tended
to widen the differential.
- Conversion capacity increased somewhat during this period, but it probably had little
influence on the light-heavy differential.