What's changing in East Coast fuels markets?The U.S. East Coast petroleum product market is undergoing fundamental changes from the standpoint of supply and demand. In addition to the announced idling and potential closure of several major refineries, a number of Northeastern states plan a transition to ultra-low sulfur diesel for heating oil use beginning with New York in the summer of 2012. This article provides an overview of EIA's recent analyses related to East Coast fuels markets. |
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Did You Know?Distillate fuel oil includes diesel fuels classified based on the sulfur composition: Ultra-low sulfur diesel (ULSD) less than 15 parts per million (ppm) sulfur used mostly in on-highway vehicles. Higher Sulfur (Non-ULSD) Distillate (more than 15 ppm sulfur) including No. 2 distillate heating oil (dyed red); used in residential and commercial heating systems, industrial, and power generation applications, waterborne and rail transportation, and off-highway. |
Several refineries supplying the East Coast have recently closedSince September 2011, two refineries in the Philadelphia area (ConocoPhillips' Trainer refinery and Sunoco's Marcus Hook refinery) and two major Caribbean export refineries supplying the East Coast (HOVENSA's U.S. Virgin Islands refinery and Valero's Aruba refinery) have or will soon close. In addition, Sunoco has announced plans to idle its remaining Philadelphia-area refinery (Sunoco Philadelphia) in July 2012 if no buyer is found. The three Philadelphia-area refineries (Trainer, Marcus Hook, and Philadelphia) taken together represented 50% of total East Coast refining capacity as of August 2011. Refining capacity is available outside of the East Coast, but transportation constraints may hinder the delivery of refined petroleum products in the short term, especially into Pennsylvania and western New York, areas currently supplied by pipelines originating in the Philadelphia area refinery complex. Infrastructure changes will be necessary to accommodate the changing product flows. If the Sunoco Philadelphia refinery closes, price impacts are highly uncertain. In the short term, prices could spike if areas are not adequately supplied. In the longer run, higher prices and possibly higher price volatility can result from longer supply chains. Ultra-low sulfur diesel (ULSD) will be the most challenging product to replace as there are few alternative supply sources outside of the U.S. Gulf Coast. A number of states in the Northeast are slated to begin requiring ULSD for heating oil beginning with New York in July 2012. The current transition schedule accompanies this article. Connecticut does not appear on the schedule because its 2011 law required New York, Massachusetts, and Rhode Island to have similar requirements in order to trigger compliance, and the three states do not have ULSD requirements in place. This article provides some key points and graphics from recent EIA reports and articles related to East Coast fuels markets. EIA has provided a review of these developments in two recent reports:
The situation is evolving, and EIA will continue to monitor it closely. In addition to these two reports, a number of EIA articles focused on different facets of East Coast fuels markets. Some main points from these articles include:
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