Crude Oil Deluge to Hit U.S. Gulf Coast: Plains All American Pipeline, L.P. (PAA), Kinder Morgan Energy Partners LP (KMP)

Consequences of rising Gulf Coast crude supplies
One of the positive impacts of rising volumes of crude into the Gulf Coast has been refiners’ reduced reliance on foreign imports of light sweet crude oil. For years, the nation’s refiners have depended on this type of oil – which is less viscous, has a lower sulfur content, and is easier to refine than heavier grades – from countries like Nigeria and Angola.

But thanks to growing production and recent improvements in transportation, the U.S. has markedly reduced its imports of West African crude. Since 2010, imports from Nigeria have fallen by half, while Angolan imports have declined from an average of 543,000 barrels per day in 2008 to under 200,000 barrels per day currently.

The impact of this dramatic realignment of light sweet crude supplies was evident in the earnings releases of some of the major refining firms that have Gulf Coast operations. For instance, Valero Energy Corporation (NYSE:VLO) , which has seven refineries near the Gulf Coast, said that it has replaced all imports of foreign light sweet crude with domestic crude at its Gulf Coast and Memphis refineries.

This massive influx of cheap crude is expected to boost Gulf Coast refiners’ already high operating rates further. John Auers, an analyst at petroleum and refinery consulting firm Turner Mason, projects that domestic light crude runs to Gulf Coast refiners will increase by well over 1 million barrels per day, which should make the region virtually independent from foreign imports of light sweet crude by the year’s end.

Not only do these developments bode well for the bottom lines of Gulf Coast refiners that have the capacity to process light oil, but they also offer renewed hope for America’s reduced dependence on foreign crude oil.

The article Crude Oil Deluge to Hit U.S. Gulf Coast originally appeared on Fool.com and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners L.P. and Magellan Midstream Partners, L.P.

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