Not too long ago, industry specialists predicted a gloomy future for fuel supply on the East Coast, warning of shortages and price hikes, as a number of big refineries in the region were on the verge of closing. As we now know, none of this happened and the U.S. Eastern Seaboard is experiencing no lack of fuel at all. This is thanks to new players and the development of the Bakken Shale formation, with transportation of crude via rail to several states, Platts explains in a post on its blog.
The drastic change in the market occurred over a relatively short space of time. Just a couple of years ago, the existence of three of the biggest refineries was uncertain: the Sunoco-owned refineries in Marcus Hook and Philadelphia, Pa., and the ConocoPhillips-owned refinery in Trainer, Pa. At the same time, Hess Corporation and its partner PDVSA were working on scaling back operations of the Hovensa refinery on St. Croix, which supplied crude to the U.S. Atlantic Coast, to 350,000 barrels per day in 2011. Eventually, it shut down in January 2012.
The U.S. Energy Information Administration (EIA) focused on the problem in a report issued in late 2011 and an update the following spring. It stated that half of the East Coast refining capacity would be lost if the three major plants closed down. While it is true that some refineries in the region did stop operations, such as the Hess plant in Port Reading, N.J., Sunoco's Eagle Point refinery in Westville, N.J., and the Western Refining-owned refinery in Yorktown, Va., the total result was nowhere near the pessimistic predictions.
RELATED: US oil companies sell assets overseas to invest at home
Now, the biggest plants are working at full throttle. The Philadelphia refinery is now run by Philadelphia Energy Solutions and produces 330,000 barrels per day of crude, while the 185,000-barrels-per-day Trainer plant is being operated by a subsidiary of Delta Air Lines, with the purpose to produce a larger proportion of jet fuel. Trainer also provides refined products to Phillips 66 and BP. The last of the big three, Marcus Hook refinery, now serves as a Sunoco Logistics tank farm for storage of gasoline and middle distillates.
According to the most recent EIA weekly oil data, the U.S. East Coast has reached a record high rate of refining capacity at 93.8 percent, with a total crude processing capacity at 1.293 million barrels per day. This is compared with the 1.397 million barrels per day in July 2010, when the previous utilization rate record was hit at 93.2 percent. Instead of losing half its capacity, the region has seen it going slightly down by just 100,000 barrels per day.
The increase in Bakken oil production has already outstripped past anticipation, commented Joanne Shore, chief industry analyst at the American Fuel & Petrochemicals Manufacturers trade group. The further development of the oil industry on the East Coast will be up to several factors including demand, Platts concluded.