U.S. exports of diesel and other distillates averaged 1.2 million barrels/day (MMb/d) in 2016, more than eight times their 2005 level and up slightly from 2015, another in a series of record-busting years for distillate exports. So far, 2017 looks like another winner. This year, though, a lot more distillate is being shipped south from Gulf Coast marine terminals to nearby Central America and South America, and less is being floated across the Atlantic to Western Europe. Today we consider recent trends in U.S. distillate exports and the significance of the export market to U.S. refiners.
Way back in the 1970s—literally a lifetime ago for many RBN blog readers—U.S. exports of diesel and other distillates averaged less than 3 Mb/d. That’s no typo; daily distillate exports on a typical day back in the Disco Era were less than 3,000 barrels. Today, in the Shale Era, that many barrels of distillate are being exported from U.S. marine terminals every three and a half minutes or so. (We did the math—2016 distillate exports averaged 1.2 MMb/d; divide that by 24 (hours in a day), then by 60 (minutes in an hour) and you get 826 barrels/minute.) It goes without saying, then, that distillate exports play a key role in the profitability of U.S. refineries, especially (as we’ll get to) those along the Gulf Coast, the send-off point for the vast majority of U.S. refined products shipped overseas. The same is true for gasoline exports.
We’ve blogged extensively about distillate (and gasoline) exports. In our Baby You Can Drive My Exports series, we said that the boom in exports of U.S. refined products, spearheaded by Gulf Coast refineries, has been driven primarily by high diesel margins. Those diesel margins have incentivized Gulf Coast refiners to process more crude to produce diesel for export along with by-product gasoline—even if margins for gasoline have not been quite as attractive. Tepid domestic demand for diesel (and gasoline) also have freed up refinery capacity to produce exports. However, the distillates export boom could not be sustained without ready markets for diesel and other distillates in Latin America and Europe, and Gulf Coast refineries have been able to secure these markets in part because their feedstock and fuel costs are lower—including the cost of natural gas, which is not only used as fuel to provide refiners with a source of heat but also to produce hydrogen, an important feedstock in the production of low sulfur diesel (see Pump Up the Volume).