Released on November 25, 2009
(Next Release on December 2, 2009)

Market Conditions Reduce Refinery Outage Impacts

The Energy Information Administration (EIA) reviews planned refinery outages in the spring and fall, when maintenance-related outages are typically high, to evaluate whether they might have a significant impact on prices. The recently released fall report, Market Assessment of Refinery Outages Planned for October 2009 through January 2010, finds that refinery capacity net of outages should be adequate to meet projected national needs during the upcoming heating season.

Market conditions are blunting the potential impacts of both planned and unplanned refinery outages. The economic downturn this year resulted in decreased petroleum demand and low refinery utilization (Figure 1). As a result, more capacity to make up for capacity lost through planned refinery outages is available than would be otherwise. Furthermore, increased use of ethanol in gasoline reduced the need for crude-based gasoline production, and world supply of gasoline available for importation to the U.S. is increasing. Lastly, U.S. inventories of total products and crude oil remain high, providing extra supply cushion to meet market needs during outages.

EIA’s refinery outage assessment focuses on crude oil distillation and fluid catalytic cracking capacity (FCC) outages. Distillate production is mainly affected by outages of the crude distillation unit, while gasoline production is more strongly correlated with FCC unit outages. Our assessment includes the impacts of the indefinite idling of Sunoco’s 145,000-barrel-per-day Eagle Point refinery in New Jersey. Available refinery crude distillation capacity could run about 2 million barrels per day more than projected needs, implying that at least 10 percent of available capacity may not be required. Likewise, available FCC capacity will be about 10 percent greater than projected demand.

In summary, refinery outages are not expected to create significant price pressure by reducing supplies below levels necessary to meet projected petroleum demand this winter. The combined outlook for planned and typical unplanned outages, weak product demand, widely available imports, and ample U.S. gasoline and distillate stocks leads to this conclusion. While market conditions are currently providing a cushion of available supply that limits the potential impacts of both planned and unplanned outages, those same conditions could lead to reduced surplus capacity in the future if continued economic pressures on refining result in more refinery shutdowns.

U.S. Average Gasoline Price Creeps up a Penny
Moving up a penny to $2.64 per gallon, the U.S. average price for regular gasoline increased for the first time in three weeks. The average was $0.75 above the price a year ago. Price changes were mixed on a regional basis, with the East Coast essentially unchanged while prices in the Midwest and Gulf Coast went up and prices in the Western regions dropped. The average price on the Gulf Coast increased a penny to $2.51 per gallon and the Midwest average rose nearly four cents to $2.58 per gallon. In the Rocky Mountains, the average dipped two cents to $2.58 per gallon. On the West Coast, the average slipped a penny to $2.88 per gallon. The average in California dropped two cents to $2.94 per gallon.

Although the national average price for diesel fuel slipped a fraction of a cent, it was relatively unchanged at $2.79 per gallon. The average is $0.12 per gallon higher than last year at this time. The prices on the East Coast and Midwest dropped about a penny to $2.80 and $2.76 per gallon, respectively. The averages on the Gulf Coast and in the Rocky Mountains inched up half a penny to settle at $2.74 and $ 2.83 per gallon, respectively. On the West Coast, the average slipped a fraction of a cent, to remain essentially unchanged at $2.90 per gallon. The price in California dipped a penny to $2.95 per gallon.

Propane Stocks Continue to Decline
Propane inventories continued to fall last week from their October peak. Total U.S. inventories dropped over 1.8 million barrels to 63.6 last week. Consequently, primary inventories of propane have moved closer to the lower boundary of the average range for this time of year. The Midwest region led the decline with 1.3 million barrels of stock draw. The East Coast regional inventories declined 0.4 million barrels, while the Gulf Coast and Rocky Mountain/West Coast regions both drew 0.1 million barrels of inventory. Propylene non-fuel use inventories increased their share of total propane/propylene inventories from 3.4 percent to 3.5 percent.

Residential Fuel Prices Increase
Residential heating oil prices rose during the period ending November 23, 2009. The average residential heating oil price gained 0.3 cent per gallon last week to reach 274.7 cents per gallon, an increase of 3.4 cents per gallon from the same time last year. Wholesale heating oil prices increased 0.3 cent per gallon to reach 204.8 cents per gallon, 21.2 cents per gallon higher than at this time last year.

The average residential propane price increased 3.1 cents per gallon to reach 227.2 cents per gallon. This was a decrease of 14.3 cents per gallon compared to the 241.5 cents per gallon average from the same period last year. Wholesale propane prices gained 3.1 cents per gallon, from 117.0 cents per gallon to 120.1 cents per gallon. This was an increase of 38.9 cents per gallon when compared to the November 24, 2008 price of 81.2 cents per gallon.

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