Keep the Gravy, Pass the Shale!

As the United States prepares to celebrate the bounty of the harvest this Thanksgiving holiday, some refiners in the mid Continent and US Gulf are celebrating an abundance of another sort. After years of declining domestic crude oil output, development of unconventional and offshore reserves and general advances in technology have led to dramatic increases in US crude oil production. The increased output from continental shale oil deposits along with increased Canadian imports to inland delivery centers have aggravated transportation bottlenecks in the Midwestern United States. This boost has also contributed to a persistent discount of inland grades to similar price marker crude oils. Refiners in a position to do so have enjoyed bumper margins processing these so called “advantage” crude oils, which have served to somewhat displace import barrels. However, the degree to which domestic crude oil barrels will stand in for long haul imports going forward will ultimately hinge upon the quality required by the nation’s refiners and the pricing of domestic supplies relative to imported streams. Download here