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Today in Energy

August 24, 2011

Crude oil movements from the Midwest to the Gulf Coast on the rise

graph of crude oil movements from the Midwest to the Gulf Coast, as described in the article text
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: For 2010 data, the 5-year moving average is an average of 2005-2009 data; for 2011 data, the 5-year moving average is an average of 2006-2010 data.
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Crude oil movements from the Midwest (Petroleum Administrative Defense District, or PADD 2) to the U.S. Gulf Coast (PADD 3) are up due partly to increasing crude oil supplies from Canada and growing oil production in the Bakken formation. On average,184,000 barrels per day of crude oil moved from PADD 2 to PADD 3 during the first five months of 2011, about 2.5 times greater than average volumes over the period from 2006 to 2010. Conversely, crude flows from the Gulf Coast to the Midwest have been falling.

Growing land-locked crude oil supplies in Cushing, Oklahoma (part of the Midwest), and limited refinery access to those supplies, are keeping crude prices in the region lower relative to other domestic and global locations. The price difference between Louisiana Light Sweet crude oil and West Texas Intermediate crude oil has persistently exceeded $15 per barrel for much of 2011. At these price levels shipping economics provide a strong incentive for increasing petroleum movements out of the Midwest, even using high-cost modes of transportation such as rail and trucks.

EIA's Petroleum Supply Monthly data for May 2011, the most recent data available, show pipeline shipments of crude oil from the Midwest to the Gulf Coast of 166,000 barrels per day (bbl/d) and those by tanker and barge at 28,000 bbl/d; these are 43,000 and 19,000 bbl/d increases, respectively, from January 2010.

EIA's surveys exclude truck and rail shipments, which some third-party sources estimate may be as large as, or even larger than pipeline shipments. Therefore, EIA's figures are likely to underestimate total crude shipments from PADD 2 to PADD 3. The Gulf Coast remains a net exporter of crude oil to the Midwest, despite the recent increases in crude shipments from the Midwest to the Gulf Coast. In May, the Gulf Coast shipped about one million bbl/d of crude oil to the Midwest.

For further discussion of this topic please refer to the August 3, 2011 edition of This Week in Petroleum.