As U.S. Tight Oil Production Grows, Can the Nation’s Refineries Process It?

During the past ten years, thanks to horizontal drilling and hydraulic fracturing, the U.S. has gone from being the world’s largest importer of petroleum products to the leading exporter of these same products worldwide. At the same time, there has been a general decline in the use of those same products, creating an historic domestic oil glut.This glut inspires questions about how U.S. refineries can handle it all.

The U.S. Energy Information Agency has responded with a study of the problem. These are the questions their report answers:

  • How large is the opportunity to further increase the utilization of existing refining assets to process more Light, Tight Oil (LTO), and what are the economic costs associated with such increased utilization?
  • What is the actual opportunity for LTO to displace non-similar grades of imported crude oil?
  • At what rates of return and payback periods would investments in additional processing capacity become attractive, given the risks associated with future changes to policy, prices, and production?
  • How might the costs associated with processing more LTO in domestic facilities be reflected in prices paid to LTO producers? How would any price discount affect projected LTO production?