In September and October 2017, the difference between domestic and foreign crude oil prices has risen to the highest level since 2015. In the past, price differences between West Texas Intermediate (WTI) and Brent crude oil led to changes in crude oil supply for petroleum refineries in the U.S. East Coast region. However, recent price changes are not expected to affect East Coast crude oil supply unless the gap continues and widens. Between 2011 and 2013, when domestic crude oil prices (WTI) ranged from $3 per barrel (b) to $27/b lower than foreign crude oil (Brent) on a monthly average basis, refineries on the U.S. East Coast changed how they were supplied with crude oil. The recent price spread, which has averaged $6/b in September and October, has not grown large enough—and is not expected to last long enough—for changes similar to those seen between 2011 and 2013.
For U.S. East Coast refineries, the Brent-WTI spread can partially determine when switching to domestic crude oil would be more profitable. Before 2011, refineries on the U.S. East Coast (defined as Petroleum Administration for Defense District 1) typically processed imported crude oil because transportation options for sourcing domestically produced crude oil were limited and relatively expensive. Between 2011 and 2013, U.S. crude oil production grew faster than transportation, storage, and refining capacity could accommodate, and restrictions on exporting domestically produced crude oil led to relatively low prices for WTI compared with Brent. The large and prolonged domestic crude oil price discount from 2011 to 2013 prompted East Coast refineries to source domestic crude oil by coastwise-compliant shipping arrangements and by investing in crude-by-rail projects, among other means.