Shale Oil Revives East Coast Refineries
A year ago, the shutdown of several refineries serving the Northeast and the possibility they would not reopen threatened to boost New England’s already high gasoline prices by as much as 15 cents a gallon. But an influxof cheaper crude oil extracted from shale rock formations in the United States has helped save most of those facilities and stabilized gas prices.
The revival of the East Coast refineries is another example of how the controversial drilling process known as hydraulic fracturing, or fracking, is changing the energy equation for the region, nation, and world.
Just as fracking opened vast reserves of natural gas over the past decade, it is now unlocking crude oil trapped in shale deposits. It is so dramatically increasing domestic production that the United States is projected to surpass Saudi Arabia as the world’s biggest oil producer by 2017.
The influx of this domestic crude, known as “tight oil,” has allowed East Coast refineries to decrease their reliance on more expensive foreign oil, increase profit margins, and regain their economic competitiveness, refinery operators say. They estimate the domestic crude cuts oil costs by a few dollars per barrel, which can have a huge impact on their bottom line.
“A savings of $1 per barrel across our entire refining system is worth several hundred million dollars of net income to Phillips 66,” said Dennis Nuss, spokesman for the Houston company operating the Bayway refinery in New Jersey.
In Philadelphia, domestic supplies have helped resurrect a facility that accounts for nearly one-fourth of East Coast refining capacity. It was put up for sale in 2011 and expected to close for good last summer as high oil prices and slackening demand made it barely profitable. Today, it is refining up to 330,000 barrels of oil a day, getting about 10 percent of its crude from the Bakken shale formation in North Dakota.
Phil Rinaldi, chief executive of Philadelphia Energy Solutions, the company that now operates the refinery, said the domestic supplies are pressuring foreign producers to keep their prices competitive.