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Appendix B. Supply and Distribution of Light Products
 The
size and duration of price surges are determined by the size of the imbalance
and the time it takes to resolve the problem. One factor that influences
the time to fill a gap between supply and demand is the distance that
new supply must travel. Both the East Coast and the Midwest are dependent
on products made on the Gulf Coast, which can take several weeks to travel
by pipeline or barge (Figure 4). In addition, the East Coast depends on
imports, some of which also come from some distance, such as Europe.
A small amount of material even moves from the Gulf Coast to the West Coast
through the Panama Canal.
The East Coast (PADD 1) is most dependent on distant production
(Figure 5). More than half of its light product needs come by pipeline
or barge. Of that product moving from other PADDs, almost 80 percent comes
by pipeline. The Midwest is also dependent on distant light product production
– mainly from the Gulf Coast. About 86 percent of the Midwest light
products from other PADDs comes via pipeline.
 The
Gulf Coast (PADD 3), which is the source of most of the East Coast’s
and Midwest’s domestic net receipts, is not dependent on external
supply sources. Today, the Rocky Mountain area (PADD 4) and the West Coast
(PADD 5) receive some products from other PADDs, but to a much smaller
extent than PADDs 1 and 2.
The future need for inter-PADD product flows will depend
on how demand in each PADD is growing relative to its own refinery capacity.
As MTBE is phased out of gasoline, either through State or Federal actions,
both West and East Coast refineries are expected to experience the largest
loss of production capability because of the high percentage of RFG they
produce. As a result, the Gulf Coast could be sending more volumes to
these coastal regions. The net result could be an increase in the percentage
of product flowing over long distances, which could increase the potential
for price volatility. |