Gulf Coast refineries are also running at higher levels than they have been in recent years. Although crude oil input costs are not as low for Gulf Coast refiners as they are for those in the Midwest and Rocky Mountains, the Gulf Coast refining complex has added capacity in recent years leading to increased crude oil runs. The Gulf Coast produces more refined products than required to satisfy regional demand, and refineries in the region tend to have deep-conversion capacity. This abundance of relatively sophisticated capacity allows refiners to produce a high-value product slate which, given the Gulf's location, can be efficiently exported to serve other regions of the United States, as well as growing Latin American markets.
The East and West Coasts are the exception to the trend of higher refinery runs. Those regions' reliance on relatively expensive crude oil, along with reductions in capacity over the last several years, has led to below-average runs. West Coast crude runs are down 0.9 percent in 2012 compared to last year, and have been 5.7 percent below their five-year average. On the East Coast, runs are down 9.9 percent year-over-year through May. This decline can be largely attributed to the East Coast having less operable capacity this year than last. In addition, East Coast crude oil costs have been about $12 per barrel above the U.S. average in 2012. These high crude oil costs were part of the reason behind the 2011 announcement of the potential closure of three of the regions' refineries in 2012. However, recent developments indicate that only one of these three refineries - Sunoco's Marcus Hook plant - will be closed permanently. The former ConocoPhillips Trainer facility, now owned by Delta Air Lines, was closed in September 2011 and is expected to return to service later this year. Sunoco's Philadelphia refinery is expected to remain in operation following the formation of a joint venture between The Carlyle Group and Sunoco. Once Trainer restarts, crude runs on the East Coast will likely increase.
The impacts of these changes in crude runs are becoming apparent. Increased gasoline and distillate production in the Midwest, a traditional market for Gulf Coast products, has reduced the requirement to ship products up from the Gulf. As a result, more products produced in the Gulf are available for export or delivery to the East Coast. See the July 5 edition of TWIP for additional discussion of distillate exports.