I learned about the TransCanada West to East pipeline yesterday and the first thing that popped into my mind was how this would affect the East Coast.
My understanding is that TransCanada will be pitching the idea primarily to Canadian refiners. However, the export costs to the US East Coast refiners would be smaller than the cost shipped to the Gulf Coast or to Europe. As a result, my belief is that the East Coast refiners will benefit as a result of cheaper transport costs.
Management at TC also mentioned that there are still many more possibilities that are available now that the world has been made aware of the plans. In 2017 the first part of the pipeline will be completed and a year later the second part.
PBF's rail costs would be cut down substantially if they could rail up to Canada.
One other item to consider is the type of crude being transported. TC mentioned they will most likely be piping light crude in order to satisfy the Canadian refiners. However, they also said it could be changed as a result of demand.
I say all of this because I am now concerned about the KeyStone Pipeline going to the Gulf Coast with the amount of politics blocking the pipeline. If the Gulf Coast pipeline does not get built it would be very helpful to the East Coast refiners as it would push TC to get the West to East pipeline built so that exports could grow.
TransCanada is in this to make money and be competitive. If the East Coast refiners are able to process the crude available then it would make economic sense to push the crude East.
The US population must be steaming that the price of gas is so high after all the drilling and pipelines that have been built. No one seems to have a good answer. I read where now that a lot of the pipeline construction were finished the oil companies do not have to sell at a discount when the refiners bought cheap and railed in oil for a nice profit. Only plus so far I can see for PBF is that maybe Canada and their Oil Sands will sell their oil on the cheap to compete. Anyone have thoughts going forward?
I believe the economics of the situation are very important.
With the cost of RINS + the availability of an export market, refiners are now figuring out a way to balance the profitability between exporting and domestic usage.
RINS affect the price of gasoline, and if gasoline rises as a result of the RINS cost rising that means demand would begin to shrink over time. In order to stabilize the demand, refiners would have to export more product in order to keep gasoline prices at an equilibrium.
To me, the reason why so many refiners are exporting product is because of the supply/demand economics in the market. Other countries are looking for competitively priced oil, and if they can get it from the United States they will. If the United States decided to put a high tax on the refined product exports it would discourage exports. Or, if a RIN was required to be purchased on any exported barrels it would also discourage the exporting of refined product.