Exports of U.S. Refined Products Surge

Thanks to surging oil production from shale, made available by safe hydraulic fracturing and horizontal drilling, U.S. refiners are turning out an abundance of finished products, meeting domestic needs while also supporting exports. U.S. crude oil production averaged an estimated 8.9 million barrels per day (b/d) in 2016. U.S. companies exported a record 3 million barrels a day of refined products according to data from the Energy Information Administration. U.S crude oil production is forecast to average 9.2 million b/d in 2017 and 9.7 million b/d in 2018.

Although Mexico is a large crude oil producer, it relies heavily on imports of gasoline from the United States to meet domestic demand. Last year, Mexico began allowing entities other than the state-owned company Petróleos Mexicanos (Pemex) to import gasoline and diesel and open retail stations. According to the U.S. Energy Information Administration (EIA), last year U.S. gasoline exports accounted for 80% of all Mexican gasoline imports, growing as a share of total Mexican gasoline consumption from 30% to more than 50% since 2014.

“U.S. refiners are now the refiners for the world,” said Ivan Sandrea, head of Sierra Oil & Gas, which is planning to build infrastructure to import U.S. fuels into Mexico. From major producers such as Chevron Corp. to specialized refiners including Valero Energy Corp., the U.S. refining industry has shifted its game over the last five years, taking advantage of gaps left by struggling refiners in Latin America, Africa and Asia. Along the way, it’s transforming what had long been a largely domestic business into a new global venture.

“You’ve got to be careful about what you describe as demand,” said Thomas Olney, an analyst at Facts Global Energy, a consultancy. “In effect it’s just that domestic production has been struggling,” he said. The same holds true for countries from Brazil to Nigeria, where U.S. refiners are taking advantage of a lack of enough local refining capacity to meet domestic fuel needs. Ixchel Castro, a Latin American oil-market expert at consultant Wood Mackenzie Ltd., said U.S. gasoline exports to Mexico could drop by 15% in 2017 if Pemex re-start its refineries.