US Refiners Dominate Western Hemisphere Markets

The United States is fast becoming the major refining hub for the entire western hemisphere as plentiful crude at home and superior efficiency enable U.S. refiners to grab market share across the region.

 

U.S. refiners now supply almost a quarter of the rest of the hemisphere's daily fuel demand, up from less than 10 percent a decade ago.

 

U.S. refiners are exporting more than 4 million barrels of gasoline, diesel and other fuels every day around the world, up from 1 million barrels per day in 2005.

 

Two-thirds of the exports, almost 2.8 million barrels per day (bpd), go to markets in the western hemisphere, according to U.S. Customs.

 

Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Panama, Peru and Venezuela all received record or near-record shipments last year.

 

Other countries as far away as France, Nigeria, China, South Korea, Australia and Lebanon have also seen increased imports from the United States.

 

But the western hemisphere has been the biggest and fastest growing market for U.S. refineries, accounting for an extra 2 million barrels per day since 2005.

 

U.S. refiners have turned to exporting as demand for gasoline and other refined fuels has stagnated at home. Domestic consumption of petroleum products peaked in 2005, though recently there have been signs of renewed growth as oil prices have fallen.

 

At the same time, the mostly small, old and inefficient refineries across the rest of the hemisphere have struggled to meet growing demand, creating a gap into which U.S. refiners have stepped hungrily.

 

U.S. refineries have also benefited from soaring shale production and the ban on crude exports which enables them to buy crude at home at a steeply discounted price to process it for export.

 

The result has been an extraordinary surge in exporting which has no parallel since 1945, when the United States was exporting fuel to Britain and other wartime allies.

 

Exports to Brazil have quadrupled to 215,000 bpd since 2009. Exports to Canada are up by more than double to 478,000 bpd. Exports to Mexico are up by over 70 percent to 555,000 bpd.

 

U.S. refiners have captured almost all of the increase in the hemispheric product market since 2005 (http://link.reuters.com/hen74w).

 

Export markets have become vital to the profitability of U.S. refineries.

 

Strong demand for exports could help explain why record seasonal refinery runs so far in 2015 in the United States have not resulted in a big build up in refined product stocks.

 

Short-term estimates are highly uncertain but exports seem to be running several hundred thousand barrels per day above 2014 levels in recent weeks, according to estimates by the Energy Information Administration.

 

Many analyses still treat the U.S. refiners as if they were catering almost exclusively to domestic consumers when they are in fact part of an increasingly integrated hemispheric and indeed global market.