The world is full of apparent paradoxes and contradictions, like the phrase “this page intentionally left blank” on a blank page of a government report, and the energy sector is no different. The United States is the world’s largest exporter of the “big 3” petroleum products: gasoline, diesel/diesel, and jet fuel/kerosene, but it still imports significant volumes of these same products. This paradox, not unlike the United States’ need to export and import different grades of crude oil, is tied to a mismatch between where the product is produced and where it is consumed. In today’s RBN blog, we look at the factors contributing to this mismatch and what it means for the production and exports of the US “Big 3”.
Let’s start with the basics. PADD 3, which is composed primarily of the Gulf Coast states, is the longest of all the “Big 3” products (about 5.8 Mb/d in 2022) and represents most of the US. product exports (gray layer in the graph on the right of Figure 1). In turn, PADD 1 (East Coast) represents approximately three-quarters of the US product imports (dark blue layer in left graph). These imports are necessary because movements from PADD 3 to PADD 1 are limited by pipeline capacity, and the two main pipelines that travel from the Gulf Coast to the East Coast (Colonial and the former Plantation Pipeline, now called Products Pipeline) are generally full, which leaves PADD 1 needing barrels. Overall, PADD 1 contributed about 3.8 Mb/d of gasoline, diesel and jet fuel in 2022, mostly through pipelines from PADD 3, with smaller volumes coming from PADD 2 (Midwest) and through imports.
Another contributor to the export/import paradox is the Jones Act, which requires all movements of goods by water within the US to be carried out on US-built, flagged and manned vessels. (We’ve written extensively about the Jones Act and its impact over the years, most recently in the 2020s Time will tell). Instead of moving products from PADD 3 to PADD 1 by ship, the Jones Act makes it less expensive for PADD 3 to export incremental products and for PADD 1 to import products, primarily from Europe and Canada.
