The U.S. is seeing softer domestic demand for traditional fuels, but pockets of the country remain highly dependent on imported gasoline, jet fuel and diesel. Today, we’ll zero in on which PADDs are at the highest risk for shortages and price spikes if the Iran war drags on for an extended period.
U.S. refineries are, of course, far less dependent on crude oil from the Middle East than they were before the Shale Revolution. But the cutoff in oil supplies from the Persian Gulf is forcing several U.S. refiners to look elsewhere for the mostly medium-sour crude they had been sourcing from the region.
The six states in EIA’s PADD 1C subregion — Florida, Georgia, South Carolina, North Carolina, Virginia and West Virginia — consume massive volumes of refined products but produce very little themselves. That dichotomy spurred a multi-decade buildout of highly efficient pipeline, marine and trucking networks.
For the past several years, a potent combination of market developments has incentivized PADD 2/Midwest refiners — and their midstream partners — to move increasing volumes of refined products east. In today’s RBN blog, we’ll discuss what’s been happening lately and how it’s affecting refiners.
The U.S. refining industry has been on a real rollercoaster ride in recent years. Today, we take a region-by-region look at the future of the U.S. refining industry and explain why reductions in refining capacity are expected in some areas while others may be in a position to thrive.
The U.S. refining industry has undergone a number of changes in recent years and more turbulence looks likely as global economic and trade patterns shift and energy transition moves forward. For some refineries, this has led to closures due to weak profits, rising regulatory costs and declining demand for products, particularly gasoline. But other refineries have prospered — and even invested in expansions — while the U.S. industry as a whole has evolved into the most competitive system in the world. Overall, the prospects have been very regionally (and even facility) specific. As detailed in the most recent Future of Fuels report from our Refined Fuels Analytics (RFA) practice, this regional differentiation will continue and shift over the coming years. In today’s RBN blog, we’ll discuss what we expect for the U.S. refining industry — where closures will likely take place, where the industry might actually add capacity, and the reasons for those actions.
PADD 1 — the East Coast — represents about 31% of total U.S. consumption of refined products (and 37% of its population) but is home to just 5% of U.S. refinery capacity. With only minimal in-region crude oil production, PADD 1 refineries are almost entirely dependent on imported and domestic inflows of both crude oil and products like gasoline, diesel and jet fuel. In the early years of the Shale Era, large volumes of domestic crude were railed or barged to these refineries, but in recent years they’ve again become largely reliant on imports from OPEC, Canada and other foreign sources. In today’s RBN blog, we’ll look into PADD 1’s changing crude oil and refined products supply and demand balance.
Just as homeowners in parts of the Northeast are thinking about turning on the heat again, the market for heating oil, diesel and other middle distillates in PADD 1 is unusually tight. Inventories are hovering near their five-year lows; prices are up sharply; and the near-term prospects for rebuilding stocks are modest at best. For one thing, the import-dependent region can’t rely on them as much as it used to; for another, at least a couple of in-region and nearby Canadian refineries the Northeast counts on are offline for major turnarounds. In today’s RBN blog, we discuss the latest developments in PADD 1’s distillates market.
The U.S. market for distillates has been crazy the past few months — especially in PADD 1 — and given all that’s going on, it’s likely to stay that way for months to come. Inventories of ultra-low-sulfur diesel, heating oil and other distillates are at their lowest levels for this time of year since before the EIA started tracking them 40 years ago and diesel prices are in the stratosphere, all despite diesel crack spreads being in record-high territory — a strong incentive for refineries to churn out more distillate. In the encore edition of today’s RBN blog, we discuss the many factors affecting distillate supply, demand, inventories and prices and take a look ahead at where the market may be headed next.
The U.S. market for distillates has been crazy the past few months — especially in PADD 1 — and given all that’s going on, it’s likely to stay that way for months to come. Inventories of ultra-low-sulfur diesel, heating oil and other distillates are at their lowest levels for this time of year since before the EIA started tracking them 40 years ago and diesel prices are in the stratosphere, all despite diesel crack spreads being in record-high territory — a strong incentive for refineries to churn out more distillate. In today’s RBN blog, we discuss the many factors affecting distillate supply, demand, inventories and prices and take a look ahead at where the market may be headed next.
