Refined Products Trade Benefits North America

Mark Green
Posted March 22, 2017

Recently, we noted surging U.S. exports of refined petroleum products, more than doubling in the past decade, and how those exports are positioning the U.S. as refiner to the world (Bloomberg’s headline), strengthening our country’s trading posture. Here’s the chart we used, showing U.S. Energy Information Administration (EIA) figures:

At the same time, exports of finished petroleum products – including finished motor gasoline, propane, distillate fuel oil and others – to Canada and Mexico are a big part of the North American energy market that we posted on here, a market that is providing economic and security benefits to all three countries.

As is the case with crude oil, the U.S., Canada and Mexico make up a highly integrated products market that fosters more efficient responses when there’s a lower cost for a product or when there are constraints of some kind, natural or artificial. One example is the way abundant domestic natural gas for refining and processing helps U.S. refineries on the Gulf Coast, which are increasing diesel output for export to Mexico and to South American countries. Distillate fuel, which can be consumed in a variety of uses, accounts for the largest portion of U.S. refined product exports, and is a product whose export to Canada has grown:

More North American market give-and-take: While the U.S. is the destination for most of Mexico’s crude oil exports, Mexico gets most of its refined product imports from the U.S., including finished motor gasoline:

Infrastructure constraints in New England account for U.S. refined product imports from Canada. Most U.S. imports of distillate fuel oil are supplied to the East Coast by Canada, whose largest refinery is located in New Brunswick, just 65 miles north of the U.S. border. The facility sends more than 80 percent of its distillate fuel oil output to the U.S.

Counting all refined products, the U.S. is a net importer (narrowly) from Canada and a net exporter to Mexico. Here’s how it breaks down:

• All refined products – Canada supplies 29 percent of U.S., while 12 percent of all U.S. exports are shipped to Canada. Mexico receives 16 percent of all U.S. exports and supplies 3 percent of all U.S. imports.
• Finished motor gasoline – 50 percent of U.S. exports go to Mexico.
• Motor gasoline blending components – 25 percent of U.S. imports come from Canada, while 52 percent of U.S. exports go to Mexico.
• Distillate fuel oil – 74 percent of U.S.  imports are shipped from Canada, while 12 percent of U.S. exports are sent to Mexico.
• Kerosene-type jet fuel – 32 percent of U.S. exports are sent to Canada, and 14 percent are sent to Mexico.
• Petroleum coke – 15 percent of U.S. exports are shipped to Canada or Mexico.

Erica Bowman, API’s chief economist:

“From the development of energy resources that provide jobs and added economic value to consumer energy cost savings, free trade between the United States, Canada and Mexico has enabled North America to more fully and effectively utilize its energy resources for all of the continent’s citizens.”