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 was a reality 1 year ago.
But an influx of cheaper crude oil extracted from shale rock formations in the United States has helped save most of those facilities and stabilized gas prices.
The influx of 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.
“It allows us for the first time in a very long time to have some genuine diversity of supply,” he said. “The shale plays are game-changers.”
Last week, the average Massachusetts gas price was $3.68 a gallon, 12 cents higher than a year ago and up 25 cents in the last month alone, according to AAA Southern New England. If the refineries had stayed shuttered, however, prices would have been driven even higher, analysts believe.