This quiet revolution in crude oil production is driving an even quieter one in the downstream. Seeking to leverage their access to rising volumes of discounted heavy Canadian crude, U.S. Midwest refiners have been investing in infrastructure to process more of those relatively low-quality barrels. Their counterparts on the Gulf Coast, having long enjoyed more feedstock flexibility than other refiners in the rest of the OECD, are expanding overall crude capacity. In contrast, East Coast refiners, which do not currently enjoy those feedstock advantages and face diminishing local product demand, have been trimming capacity. The result is that refined product trade flows are being redrawn. In 2011, the United States shifted to net product exporter status for the first time since at least 1949. The East Coast, however, appears likely to become more dependent on product imports.
If 2011 was an eventful year for oil markets, 2012 might be even more so. At the onset of 2012, the U.S. and international markets face considerable uncertainty, not least from the unresolved dispute between Iran and the United Nations over Iran's nuclear program. Iran relies heavily on revenue from its crude oil exports, and various actions affecting Iran's oil trade are under consideration by several major countries as a way to increase the pressure on Iran to comply with its nuclear non-proliferation obligations. These developments are occurring against the backdrop of an oil market deeply transformed by technological advances in production, a redistribution of global demand growth, far-reaching shifts in crude and product trade flows and lingering political uncertainty in many producing countries. The U.S. Energy Information Administration will monitor these far-reaching changes and continue to assess their impacts and significance for U.S. consumers and all market participants.