Energy / Politics

Not your Typical Lunch: Fuels, Refineries and Railroads

The U.S. Energy Information Agency’s Winter Fuels Outlook was released in early October, heralding good news about lower household energy bills this winter. The report forecasts price and supply information for consumers regarding common heating fuels: natural gas, electricity, heating oil and propane. Temperatures are predicted to be warmer and the EIA has an action plan to improve winter fuels information sharing.

Adam Sieminski – the charismatic administrator of the independent energy statistics agency – added some pizazz while disclosing the results of the report on Friday, October 24, at the monthly energy luncheon hosted by the National Capital Area Chapter of the United States Association for Energy Economics.

The packed room at Carmine’s Italian restaurant in Chinatown erupted in chuckles when Mr. Sieminski asked, “Do you want the PowerPoint or should we just do stories?” The crowd of 100 plus energy professionals knew they were in for an entertaining hour of the latest energy news from the Administrator.

Mr. Sieminski happily reported that the United States is now the world’s largest oil liquids and natural gas producer. However, he did make the technical clarification that Saudi Arabia still produces the largest amount of crude oil worldwide but that the U.S. produces the most ‘liquid fuels’. The Energy Information Agency includes crude oil, hydrocarbon gas liquids, and biofuels in its definition of liquid fuels.

The Agency’s administrator also discussed the future of refining in the United States, noting that the oil produced from shale rock formations tends to be light and ‘sweet’, which means it contains less sulfur and enables easier refining. While this seems purely positive, many of American refineries are tooled for heavy sour crude from Mexico, Canada, or Venezuela, and the existing refineries which process light sweet crude are having trouble coping with the influx of domestic shale oil. As a result, the United States is importing less of Nigerian light sweet crude to free up refining capacity.

Retooling existing heavy sour crude refineries appears to be the appropriate move but is not the easiest to implement. Mr. Sieminski explained that refineries are like a custom suit; you cannot simply pull a refinery off the rack. For example, some refineries are designed to run light sweet crude from the Bakken shale while others are designed to refine heavy Canadian bitumen.

The crude by rail issue was discussed in the question and answer portion of the event. There are record numbers of pipelines under construction in the United States, over 300,000 miles and growing, according to the Energy Information Agency, but crude and refined oil products are increasingly moving around via railroads. Moving oil by rail is advantageous in a world where production is booming and overwhelms existing pipeline capacity. In the first six months of 2013, 356,000 carloads of crude oil and petroleum products were transported by rail: nearly 1.37 million barrels per day. But this comes at a price; Mr. Sieminski estimated that moving a barrel of oil by railroad is two to three times more expensive than by pipeline. Even though it’s more expensive, transporting oil by rail is winning out because there is less capital investment and fewer permits needed than transporting oil via pipeline.

In closing, Mr. Sieminski asked the audience to stay tuned for a report on liquefied natural gas exports. The study was published in late October and can be found here.

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2 thoughts on “Not your Typical Lunch: Fuels, Refineries and Railroads

  1. Pingback: We have Bigger Issues than OPEC: Outdated Law Bedevils U.S. Oil Boom | jcollins308

  2. Pingback: We Have Bigger Issues than OPEC: Outdated Law Bedevils U.S. Oil Boom | Policy Interns

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