East Coast jet fuel prices decline from record highs but remain higher than other hubs

The spot jet fuel price in New York Harbor (NYH) traded at record-high levels for several weeks in April. On April 4, 2022, the NYH spot price was $7.61 per gallon (gal). The price has since declined, but it has remained at elevated levels (Figure 1). The NYH spot price is significantly higher than spot prices at both the U.S. Gulf Coast (USGC) and the Amsterdam, Rotterdam, and Antwerp (ARA) trading hubs that averaged about $3.60/gal in March and April 2022. Rapid price increases are not uncommon in petroleum markets and are usually associated with significant supply disruptions, such as large unplanned refinery outages or natural disasters. In this instance, no significant unplanned supply disruption occurred; rather, a confluence of supply and demand factors have likely contributed to increased price volatility in the East Coast jet fuel market.

East Coast (PADD 1) jet fuel inventories declined to 6.5 million barrels the week ending April 8, 2022, the lowest for any week since EIA began recording weekly jet fuel inventories in 1990. East Coast jet fuel inventories began declining in the middle of 2021, primarily reflecting the return of jet fuel demand to pre-pandemic levels (Figure 2 and Figure 3). Among all modes of transportation, personal air travel has been the most affected by responses to the COVID-19 pandemic, which significantly disrupted global and U.S. jet fuel production and consumption. We estimate that through April 29, 2022, the four-week average U.S. jet fuel product supplied (our proxy for consumption) was 1.5 million barrels per day (b/d), 12% less than the pre-pandemic five-year (2015–19) average of 1.7 million b/d for the same time period. Nonetheless, this level was 339,000 b/d (28%) higher than the same time last year. We publish product supplied at the regional level in our Petroleum Supply Monthly (PSM), which is subject to a two-month lag. Our latest report includes February 2022 data that show East Coast consumption of jet fuel was 528,000 b/d, which is 121,000 b/d (30%) higher than 2021 but 24,000 b/d (4%) lower than the pre-pandemic five-year average.

Reduced consumption of petroleum products after the beginning of the pandemic in 2020 also affected refinery operations, which have been slower to return to pre-pandemic production levels than consumption. Increasing consumption and relatively lower production have contributed to low jet fuel inventories on the East Coast since late 2021. The majority of the East Coast’s jet fuel supply comes from refineries on the U.S. Gulf Coast (PADD 3), and the product is mostly shipped through pipeline but also by tanker or barge. Refineries in the United States have made significant operational changes since the onset of the COVID-19 pandemic. For example, refineries have focused on maximizing yields of distillate fuel oil, a product for which demand has decreased comparatively less than gasoline and jet fuel since 2020. As a result of these yield shifts, jet fuel yields and resulting refinery production from refiners on both the U.S. Gulf Coast and East Coast have remained low.

Low refinery production of jet fuel has led to fewer supplies from both within-region production as well as fewer pipeline shipments from Gulf Coast refiners. Instead, East Coast product supplied of jet fuel throughout 2021 and into 2022 has increasingly been met from tanker and barge movements from the Gulf Coast or imports. Both are more expensive methods of transport than pipeline and suggest East Coast purchasers are increasingly using shorter-term spot transactions for supply. This change could be the result of an inability or an unwillingness to sign longer-term supply deals, perhaps combined with uncertainty regarding future demand in the event of a resurgence of COVID-19 cases.

Based on the PSM, pipeline movements of jet fuel from the Gulf Coast averaged 58% of East Coast product supplied for the 12-month average through January 2022—the lowest since 2001—before increasing to 59% in February 2022. In addition, East Coast refinery production of jet fuel accounted for 13% of product supplied through February, higher than the initial months of the pandemic but lower than pre-pandemic levels of about 15% to 18%. In contrast, shares of product supplied from tanker or barge from the U.S. Gulf Coast plus imports totaled almost 33% of product supplied, up from about a 20% share a decade ago (Figure 4).

Aside from pandemic-related disruptions to petroleum product supply and demand, the East Coast’s loss of the 335,000 b/d Philadelphia Energy Solutions refinery in mid-2019 has affected refinery output of all petroleum products in the region, including jet fuel. The loss of this refinery, which closed due to an explosion in 2019, caused less immediate effects on petroleum product supplies and prices in the region because demand declined following the start of the pandemic. Based on average East Coast jet fuel yields and refinery utilization, we estimate the refinery produced approximately 20,000 b/d of jet fuel, which was about 20% of total East Coast jet fuel production before the pandemic and 3% of total product supplied. Now, as jet fuel and other petroleum product demand approaches pre-pandemic levels, the East Coast must meet its supply needs from other sources.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.