What happens with a ban on Russian oil imports?
Link to article: https://stillwaterassociates.com/what-happens-with-a-ban-on-russian-oil-imports/
March 8, 2022
By Dave Hackett
Oil is in the news in a big way with the Russian invasion of Ukraine. Until this week, most people didn’t know that the U.S. is an importer of Russian oil. This article will look at U.S. imports in 2021 and put the volumes into context relative to the larger market.
Crude Oil Imports
Even though the U.S. exports crude oil and products, oil market participants import petroleum from around the world to balance the refining and distribution profiles of the refining industry. U.S. refiners processed 15.1 million barrels per day (MBD) of crude in 2021; of that total, about 6.1 MBD of crude (or 40%) was imported. Imported Russian crude oil totaled about 0.2 MBD or about 1% of total crude oil runs and a little more than 3% of total imports. Russian crude was processed in all three coastal PADDs – PADD 1 (the East Coast), PADD 3 (the Gulf Coast), and PADD 5 (the West Coast). States with refineries included in these PADDs are Delaware, Pennsylvania, Texas, Louisiana, Hawaii, California, Washington, and Alaska.
Fuel Product Imports
The U.S. imported about 500 thousand barrels per day (KBD) of refined petroleum products from Russia in 2021. These products included gasoline, diesel, heating oil, jet fuel, residual fuel oil, and heavy gas oils. The volume of products was about 2.5 times that of the volume of crude oil, but the largest portion of the imported barrel (210 KBD) can be lumped together as heavy residual oils, most of which went into the large heavy oil refineries on the Gulf Coast as a substitute for heavy crude oil.
Gasoline Cargoes
The most interesting analysis is around the gasoline cargoes that come in. Most imports land on the East Coast—primarily at ports in New York Harbor but also at other ports in New England and the Southeast. Puerto Rico received about 11 KBD of gasoline from Russia last year, which is roughly half of the island’s demand. This gasoline has been economically supplied from Russia, rather than Louisiana or Texas, because the shipping is much cheaper on foreign-flagged ships, rather than U.S.-flagged ships.
What happens with a ban on Russian oil imports?
Now that President Biden has banned Russian oil imports into the U.S., refiners will scramble to find replacement volumes for the crude oil and heavy residual oils previously imported from Russia. Fuel product markets similarly will scramble to replace the Russian gasoline, jet fuel, and diesel. The Biden Administration will be pressured to relax the Jones Act, allowing U.S. crude oil and products to be delivered by foreign-flagged vessels from the Gulf Coast crude export terminals and refineries to U.S. markets currently supplied by Russian oil.