The increase in U.S. petroleum product exports has garnered significant attention lately, as U.S. Energy Information Administration (EIA) data showed the United States was a net exporter of petroleum products (petroleum and other liquids, excluding crude oil) for the first time since at least 1949. The rise in U.S. product exports at a time of rising domestic product prices has led some to ask if higher gasoline exports might be causing higher gasoline prices. However, the available evidence does not support such a linkage. (The March 7 edition of This Week In Petroleum provides an analysis of key factors that EIA believes are driving gasoline prices.)
Increased product exports have allowed Gulf Coast refiners an outlet for their production, which may have been reduced without this outlet. With the summer driving season approaching, this edition of TWIP will focus on gasoline exports. In 2011, total gasoline exports only comprised 18 percent of total U.S. petroleum product exports. However, they have been a growing share of total petroleum product exports since 2007 when their share was just 10 percent. The United States exported more than 500,000 barrels per day (bbl/d) of gasoline in 2011; this level represents a 57 percent increase compared to 2010, and a 266 percent increase compared to 2007. These increasing gasoline exports have been a response both to weak domestic demand and coproduction of gasoline spurred by strong global demand for distillate fuels.
The United States has always been tied into the global petroleum product markets, but this export growth has transformed its position from a net petroleum product importer into a net petroleum product exporter in short order. In terms of gasoline, the United States remained a net importer for 2011 as a whole; however, on a monthly basis, it was a small net exporter by the end of the year. In addition to gasoline exports, the United States exported about 850,000 bbl/d of distillate fuel in 2011. With distillate crack spreads regularly exceeding those for gasoline in recent years, refiners have tried to maximize distillate production to capture this value. In doing so, they have also produced more gasoline. Thus, excess gasoline in Gulf Coast markets has been partly the result of refiners responding to distillate crack spreads.
Most of the U.S. exports for distillate and gasoline come from the Gulf Coast. Gulf Coast excess capacity has resulted from both declining demand (preliminary data for 2011 show gasoline consumption 550,000 bbl/d, or 6 percent, lower than 2007) and increasing capacity, such as the recent expansion at Marathon's Garyville refinery in Louisiana. In addition, Gulf Coast refineries have a competitive advantage in some world markets. The Gulf Coast refining complex as a whole is very sophisticated. Refiners there have invested significantly in bottoms upgrading capacity and can thus run relatively cheaper crude oils. Moreover, they use natural gas for their fuel, which at current prices is an advantage compared to refineries fueled by petroleum. Gulf Coast refineries also have good water access and a location that allows for a relatively short-haul voyage to the growing Latin American markets.