As required under Section 804 of the Energy Independence and Security Act of 2007 (Pub. L. 110-140), this report reviews the supply implications of planned refinery outages for March through June 2009, which time period covers the seasonal increase in driving demand. Refinery outages are the result of planned maintenance and unplanned outages. Maintenance is usually scheduled during the times when demand is lowest-in the first quarter and again in the fall. Unplanned outages can occur at any time and for many reasons (e.g., mechanical failures, fires, and flooding).
At the U.S. level, available capacity adjusted for outages appears adequate to meet projected demand through June 2009. Apart from the effects of the hurricanes of September 2008, refinery production in 2008 and the first 3 months of 2009 have been determined by market factors rather than outage constraints. Falling demand and, in the case of gasoline, increased use of ethanol, have reduced the need for refining capacity. That situation is expected to continue in 2009.
Figure S-1 shows that potential 2009 U.S. gasoline production from capacity, after adjustments for outages, is well above actual production in 2008. Given that demand in 2009 is expected to be lower than that in 2008, adequate production capacity is available. On a regional basis, most surplus capacity is in Petroleum Administration for Defense District (PADD) 3, or the Gulf Coast region. PADD 1 is projected to experience fluid catalytic cracking (FCC) unit outages in March into April that will require more gasoline to be brought into the region (Table S-1). The Energy Information Administration's (EIA) December Market Assessment of Upcoming Planned Outages previously raised the issue regarding PADD 1, although since then, large unplanned outages have contributed to restricted supply for March, and these outages may extend into April. PADD 1 is normally dependent on gasoline imports and product from PADD 3, and extra supply from these sources has been available to serve the East Coast in March and should continue to be able to provide extra supply. However, prices on the East Coast may have to increase somewhat in order to continue to attract the extra supply. PADD 2 (Midwest) has relatively high inventories, but it is expected to have higher than normal outages in April and May. With declining demand, local capacity may be able to cover for those outages. If not, extra capacity should be available from PADD 3 to help meet PADD 2 demand. PADD 5 (West Coast) has low gasoline inventories, but in PADD 5, available capacity adjusted for outages should be adequate to meet demand.
Distillate supply (diesel and heating oil) going into the summer appears ample (Figure S-2). Inventories are high, and the export market for distillate may be weakening compared to the 2008, which resulted in high distillate exports from the United States. A weaker world distillate market indicates distillate margins may be lower than last year. No outage-related problems affecting distillate supply are evident on a regional basis through June 2009.
In summary, PADD 1 is the region in which outages during March and early April may result in significant price pressure. In EIA's view, an effort to encourage greater coordination among refiners is unlikely to ameliorate the possible impacts of planned outages in this region. Wholesale buyers who normally rely on opportunistic supply in addition to contracts could potentially minimize price impacts of planned March and April FCC outages by recognizing the potential for fewer opportunistic purchasing opportunities and arranging for additional contracts. This report should help to alert this segment of the industry to that situation and minimize price impacts in April.
| Table S-1. PADD 1 Comparison of Maximum FCC Inputs from FCC Capacity Available After Outages with Estimated STEO-Projected FCC Input Needs (Thousand Barrels Per Day) | |||||||
|---|---|---|---|---|---|---|---|
| Month (December 08 Through March 09) |
Actual and STEO Projected Crude Inputs | Actual and Projected FCC Inputs (FCC Pct Crude = 0.420) | Operable FCC Capacity | Estimated Total Outages | Capacity Net of Outages | Potential FCC Inputs (Net Capacity * 0.990) | Potential Inputs minus STEO Inputs |
| December Actual | 1,262 | 583 | 724 | 51 | 673 | NA | NA |
| January Actual | 1,352 | 568 | 724 | 41 | 683 | NA | NA |
| February Actual | 1,238 | 520 | 724 | 128 | 596 | NA | NA |
| March | 1,449 | 609 | 724 | 273 | 452 | 447 | (162) |
| April | 1,495 | 628 | 724 | 42 | 682 | 675 | 48 |
| May | 1,519 | 638 | 724 | 8 | 716 | 709 | 71 |
| June | 1,510 | 634 | 724 | 4 | 720 | 713 | 79 |
| Note: The FCC input volumes are estimated by multiplying crude inputs by a factor (0.420) that represents the average observed ratio between FCC and crude inputs for facilities experiencing no major outages. The potential FCC inputs are estimated by applying a factor (0.990) that represents the average observed difference between FCC input volumes and capacity in PADD 1 for facilities experiencing no major outages and running at high input levels. Sources: March 2009 Short Term Energy Outlook, Industrial Info Resource (IIR) www.iirenergy.com, March 2, 2009 database. |
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