RBN Energy

Motor gasoline, diesel, and jet fuel need to be delivered in large volumes to every major metropolis in the U.S. While most big cities are well-served, some by multiple pipelines or a combination of pipelines and barges, others are more isolated and susceptible to supply interruption. Nashville, the home of country music, is one such place; so are Chattanooga and Knoxville to its east. All three Tennessee cities depend heavily on stub lines off the Colonial and Plantation refined-products pipeline systems as they work their way from the Gulf Coast to the Mid-Atlantic states. When supplies on these pipes are interrupted — and they have been from time to time — these cities can experience shortages and price spikes, and be forced to turn to trucked-in volumes from Memphis and elsewhere. Today, we discuss a supply alternative now under development that will pipe motor fuels south from BP’s Whiting refinery in northwestern Indiana to a proposed Buckeye Partners storage and distribution terminal just west of Nashville.

It has been nearly a year since the novel coronavirus was first detected in China — that’s right, a year. In that time, we have seen significant parts of the world come to a near standstill, become all too familiar with video conferencing, and canceled family vacations and business travel. The fact that many of us have been stuck at home has wreaked havoc on the U.S. refining industry, with plummeting utilizations and some facilities shutting down, either temporarily or permanently. And, depending on how the U.S. transportation sector rebounds from the pandemic in 2021 and beyond, more refinery closures may be on the horizon. Today, we look at the U.S. facilities that are shutting down and tally up the capacity lost so far.

For the past several months, U.S. refineries have been producing more distillate than demand warrants, resulting in a glut of distillate fuels, especially ultra-low-sulfur diesel and jet fuel. The disconnect between supply and demand has been particularly stark in the Gulf Coast region, where just a couple of weeks ago distillate stocks sat 39% above their 10-year average after coming perilously close to tank tops in August. The culprit, of course, is COVID-19, or more specifically the effects of the pandemic on air travel and the broader economy. Demand for motor gasoline rebounded more quickly than demand for ULSD and jet fuel, and refineries churned out more gasoline to keep up, but that results in more distillate too. Now, finally, there are signs that distillate stocks may be easing back down. Today, we discuss the build-up in ULSD and jet fuel stockpiles, the ways they might revert to the norm, and the potential for storing distillate now and selling it at a higher price later.

Over each of the past eight years, we’ve opened the doors at RBN’s School of Energy with updated analytical models, new subject modules, and timely special features that have reflected the evolution of energy markets from the early days of the Shale Revolution and $100/bbl crude oil, through the price crash of 2015-16 and the incredible 2017-19 rebound. But these market shifts pale in comparison with what’s happened so far in 2020: a global pandemic, crude crashing to negative $37/bbl, a wipeout in LNG exports, a Cat 4 hurricane into Lake Charles — it just seems to keep on coming. Which means there has never been a more important time to reassess market analytics in the context of these tectonic shifts in the energy industry. That is exactly what we’ll cover today in this blatant advertorial for RBN's Fall 2020 School of Energy.

The global effort to stop the spread of COVID-19 brought the commercial aviation sector to its knees, and slashed demand for jet fuel to its lowest level in 50 years. That, combined with lower demand for motor gasoline and — to a lesser extent — diesel, forced refineries in the U.S. and elsewhere to substantially reduce their crude oil input and to make major changes in their operations, all with the aim of bringing refined product supply and demand into closer balance. After a horrific spring, U.S. jet fuel production and demand have been rebounding somewhat in recent weeks, but getting back to pre-coronavirus levels may take a long time. Today, we review the flight from hell that the jet fuel market has suffered through so far this year, and how it is affecting refineries.

They’re generally small in size, but renewable diesel refineries are popping up in many parts of the U.S., incentivized by government programs aimed at reducing carbon emissions and very gradually weaning Americans — and Canadians — from crude oil-based diesel fuel. Recently, HollyFrontier Corp. announced that it will be converting its decades-old Cheyenne, WY, refinery into a renewable diesel facility. While the news of another entrant into the renewable diesel market is not surprising, the complete shutdown and transformation of an existing refinery for this purpose marks only the second time this has occurred in the U.S. Today, we discuss HollyFrontier’s plans and provide an update on renewable diesel supply and demand dynamics.

U.S. exports of motor gasoline and diesel to Mexico increased steadily from 2013 through 2018 as demand for refined products south of the border increased and throughput at Pemex’s six older, investment-starved refineries declined. U.S.-to-Mexico shipments of gasoline and diesel sagged in 2019, though, as Pemex started to implement a major refinery rebuilding program, and fell further in the spring of 2020 as the social and economic effects of COVID kicked in and Mexican demand for motor fuels plummeted. So what’s ahead for U.S. refined product exports as Mexican demand gradually rebounds later this year and in 2021? As we discuss today, that will largely depend on the Mexican government’s determination to have its debt-laden energy company produce gasoline and diesel at a loss and proceed with expensive refinery projects.