Historically, the East Coast has attracted gasoline imports from several major sources in the Atlantic Basin. Canada, the United Kingdom, and the U.S. Virgin Islands together accounted for almost half of the region's gasoline imports in 2010. Several major export-oriented refineries in these locations have been critical in supplying the United States, including Irving Oil's refinery in St. John, New Brunswick and HOVENSA's refinery on St. Croix, U.S. Virgin Islands. However, HOVENSA announced on January 18 that they plan to shut down the St. Croix refinery in mid-February and convert it to a petroleum storage facility. Continental Europe also supplies the East Coast, with the Netherlands, Spain, and France, among others, regularly shipping gasoline across the Atlantic.
The potential shuttering of the three Philadelphia-area refineries mentioned above could result in the loss of about 300,000 bbl/d in local gasoline production. There are limited alternative sources for these supplies. Supply options include increasing ethanol use, increasing production at local refineries, increasing shipments from other regions of the United States, and increasing imports. The first three of these options appear likely to provide only marginal help in the near term. On the ethanol front, the East Coast is already blending ethanol at close to 10 percent, the near-term market saturation point, and despite the U.S. Environmental Protection Agency having approved blends of up to 15 percent ethanol, increasing blending above 10% still faces some regulatory and market hurdles. There might be some ability to increase production from other East Coast refineries, but that too would only go so far.
Increasing supplies from other regions in the United States, particularly the Gulf Coast, is another option. However, pipeline capacity from the Gulf Coast to the Northeast is constrained. While plans are underway to alleviate some constraints, they will take time to implement, and even then there will still not be enough capacity to fully make up for reduced production from the three refineries. Moreover, given the EIA's current projections, demand declines cannot be counted on to alleviate supply tightness to the extent they have over the past several years. Assuming that East Coast consumption continues to decline at the same rate as the forecasted national average (it fell at the same rate as the national average year-to-date through October in 2011), it will fall by only about 10,000 bbl/d over the next two years.