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Crash Overview of U.S. PADDs and Why They’re Important

By Market Analyst Dan

Sep 12, 2016
 

A simple overview of the U.S. PADD system and how we can use the data to understand supply chain fundamentals and optimization. 

 
 

PADD General


The United States is divided into five Petroleum Administration for Defense Districts (PADDs). The Petroleum Administration for War created PADDS during World War II to help allocate fuels derived from petroleum products.

 

               

Today, these regions are still used for data collection purposes and are very helpful in understanding the supply & demand balances of the domestic petroleum business.  Hot issues such as Keystone pipeline, Bakken oil developments, WTI Price Volatility, East Coast refinery closures, and USGC Hurricane impacts can all be easily rationalized by understanding the basics of PADD classification.



PADD Product Supply

We all know that half of the U.S. refining capacity is on the US Gulf Coast, but do we know where the other refineries are in the country? 

Few would be surprised to hear that very little refining capacity exists in the Rocky Region, but many may be surprised that close to 20% is on the



West Coast.  Many would also be surprised to learn that less than 10% of the US refining capacity resides on the East Coast.  Roughly one-third of the U.S. population is on the East Coast, but less than a tenth of the refining capacity is in that region.


Roughly 1/3 of the U.S. population is on the East Coast, but less than 1/10 of refining capacity is in that region


 

With little oil refining infrastructure and high demand, one can imagine that a great deal of logistics is required to supply consumers on the east coast.  Majority of this is managed by pipelines, but let’s not forget that rail, trucks, and barges are also required for the logistic network to remain whole.  

 

Out of the 5 million barrels per day of oil consumed on the U.S. East Coast, nearly half of it is supplied from PADD III (i.e. Gulf Coast refineries).  

Pipelines such as
Colonial and Plantation that originate from Texas and Louisiana help supply the East Coast with refinery products.  Ocean vessels help supply other areas of the East Coast such as Florida.  While product imports from North West Europe historically

balanced the rest of PADD I demand, recent market shifts have increased supply from the Gulf and decreased international imports. 

 

Although the Midwest (PADD II) has 20% of the U.S. refining capacity, it historically supplies 85% of consumer demand from refineries within the region.  As a result PADD II required product imports from PADD III, primarily through the Explorer Pipeline.  


PADD Crude Supply


60% of crude oil consumed in U.S. refineries is imported from other countries.  Half of the oil imports flow to the U.S. Gulf Coast, but the other half is distributed fairly equally to PADD I, II and V. 

       

 

When comparing refining capacity with crude supply, it becomes quickly apparent that a good amount of crude movements happen within U.S. PADDs.

 

       

 

Although 49% of US refining capacity resides in PADD III, notice how 58% of domestic crude is produced in PADD III and 55% of net crude imports also go to PADD III.  This implies that crude oil must move out of PADD III to other PADDs to remain balanced.  As a matter of fact, roughly 1.4 Million barrels a day of oil moves from PADD III to PADD II and PADD IV. 

 

Now that I’ve provided you with a quick overview of the U.S. PADD system, you will now be armed with knowledge to understand fundamental drivers of the U.S. oil supply chain.

 
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  • Mustafa Elsayed :   thanks

    Jan 14, 2014

  • Viren Doshi :   Thank you for this helpful overview

    Jan 15, 2014

  • Yan Burtovoy :   thanks

    Apr 03, 2015

  • Matt :   Little known fact-- there's actually two more PADDs for U.S. territories! Read about them here: http://chesterenergyandpolicy.com/2017/11/28/petroleum-administration-for-defense-districts-padds-past-and-present/

    Nov 28, 2017

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