• Exports of light sweet crude oil to Canada, which trade press reports indicate are already up, could continue to rise. However, depending on how greatly light, tight production grows, the markets that can be reached under current export licensing policies may be too small to alleviate the impending mismatch.
• U.S. light sweet crude could be priced at a sustained discount relative to comparable international seaborne crudes by an amount sufficient to encourage its use in refineries along the Gulf Coast that are optimized for heavier crudes. This possibility, which was mentioned in an April 24, 2013, TWIP article that addressed pricing differentials between Louisiana Light Sweet and Brent crudes, would imply lower wellhead prices for domestic light crude streams. Depending on the level of world oil prices and the size of differentials between global and domestic crude prices, lower prices could reduce the level of domestic production.
• In the short-run, U.S. refiners that switch from heavy to light crude may need to reduce their total volume of refinery runs given operating constraints that limit their ability to handle light fractions. Over time, these refineries may invest capital to increase the capability to run light crudes. For example, they may increase capacity to process light ends from distillation to avoid reducing crude input volume when running light crudes.
• Complex refineries in the United States may idle or cut back the use of cokers and other secondary processing units designed to support heavy crude processing. This could create processing bottlenecks and/or shifts in product slates.
• Markets for diesel fuel and other distillates could tighten if the switch from heavy to light inputs at complex refineries reduces the share of distillates in the output slate. Conversely, supplies of gasoline, which are currently in surplus in world markets, could rise.
• Refiners or other processors may elect to partially process some domestic light crude to produce material that could be classified as a petroleum product or feedstock rather than as crude oil. Since such products are generally not subject to export licensing requirements, they could be exported under the current policy regime.
As television announcers used to say, "Stay tuned."
Gasoline and diesel fuel prices down for a ninth consecutive week
The U.S. average retail price of regular gasoline decreased two cents to $3.52 per gallon as of April 29, 2013, down 31 cents from last year at this time. Prices were lower in all regions of the nation except the Midwest, where the price increased less than a penny to remain at $3.55 per gallon. The largest decrease came on the West Coast, where the price declined four cents to $3.80 per gallon. Dropping three cents, the Gulf Coast price is $3.30 per gallon. On the East Coast the price is $3.46 per gallon, two cents lower than last week. Rounding out the regions, the Rocky Mountain price decreased less than one cent to $3.48 per gallon.
The national average diesel fuel price decreased four cents to $3.85 per gallon, 22 cents lower than last year at this time. The largest decrease came on the Gulf Coast, where the price decreased five cents to $3.76 per gallon. The West Coast price is $3.95 per gallon, the East Coast price is $3.89 per gallon, and the Rocky Mountain price is $3.81 per gallon, all down four cents from last week. Declining three cents, the Midwest price is $3.84 per gallon.