Domestic Supply May One Day Fully Meet Gulf Refiner Needs

U.S. Oil Boom Driving Shift in Market Structure

As U.S. oil production expands, demand for light, sweet crude from refiners along the Gulf of Mexico may eventually be met entirely through domestic wells, the Energy Information Administration said in its This Week in Petroleum Report.

Gulf Coast refineries are already using high-quality, domestically-produced oil to replace imported crude from West Africa and other sources. Flows of light, sweet crude via rail to both East and West Coast refiners are also increasing. At the Gulf, refiners could probably absorb additional volumes of light, sweet crude to replace some imports of heavier oil that many plants in the region are designed to use.

However, "this could reduce the production of some high-value products and also reduce operating rates of some sophisticated refinery units used to convert low-quality, lower-priced heavy crudes into high-value products," the Energy Information Administration said.

"Traditional price premiums for light crude would probably have to fall to incentivize such behavior. For this reason, increased exports may be a more attractive option for producers if an excess of light sweet crude oil in the Gulf Coast market actually develops."

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