Move It on Over - Replumbing U.S. Refined Products Pipeline Networks

Refinery closures. Shifting demand for gasoline, diesel and jet fuel. Yawning price differentials for refined products in neighboring regions. These and other factors have spurred an ongoing reworking of the extensive U.S. products pipeline network, which transports the fuels needed to power cars, SUVs, trucks, trains and airplanes — not to mention pumps in the oil patch, tractors and lawnmowers. New products pipelines are being built and existing pipelines are being repurposed, expanded or made bidirectional, typically to take advantage of opportunities that midstreamers, refiners and marketers see opening up. In today’s RBN blog, we begin a review of major pipelines that batch gasoline, diesel and jet fuel and look at the subtle and not-so-subtle changes being made to the U.S. refined products distribution network.

Before we dive into the U.S. refined products pipeline network, the changes being made to them and the reasons for those changes, we should acknowledge an important, relevant fact, namely that the refining sector has been on a wilder-than-normal roller-coaster the past few years. A lot of the twists, turns, ups and downs relate to COVID. March 2020 brought the first round of pandemic-induced lockdowns and the steepest decline ever in demand for refined products, especially gasoline and jet fuel. In only four weeks’ time, U.S. refinery utilization plunged from 87% to 67% — a point at which many refineries had to adjust operations or shut down (see Baby Break it Down). Things inched back toward normal over the next few months, but utilization plummeted again (to as low as 56%) in February 2021, when Winter Storm Uri knocked out power to most of Texas for several days (PADD 3 utilization fell as low as 41%!).

That was followed by a gradual recovery and, with rebounding demand, rising crude oil prices and Russia’s invasion of Ukraine in early 2022, refineries again were running flat-out, with near-record utilization rates and record refining margins. As we said recently in our Cracking Up blog series, the 3-2-1 crack spread — a rule-of-thumb estimate of the profits generated by refining three barrels of crude oil into two barrels of gasoline and one barrel of diesel — soared to new heights this spring, topping $50/bbl every day since late May, according to RBN’s daily Chart Toppers report. (As a comparison, the 3-2-1 crack bottomed out at 46 cents/bbl in the early days of COVID.)

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