Complexity of Fuel Distribution System Will Impact Market Evolution

Fuels Institute examines the U.S. fuel supply chain and the challenges that exist for achieving higher adoption rates of biofuels.
August 17, 2017

ALEXANDRIA, Va. – With more than 12 million barrels of transportation fuel consumed every day, the U.S. liquid fuel distribution system is one of the largest and most complex fuel-supply chains in the world. This complexity can present challenges to the evolution of the transportation fuels market. The Fuels Institute’s report, "Assessment of the U.S. Fuel Distribution Network," prepared by Stratas Advisors, examines the U.S. fuel supply chain and the challenges that exist for achieving higher adoption rates of biofuels.

During the past decade, the U.S. transportation fuel market has shifted dramatically, with the country going from one of the world’s largest importers of petroleum products to a net exporter of transportation fuels. Today, the U.S. is close to producing almost as much gasoline as it consumes, and is a net exporter of diesel.

There is an imbalance within the U.S., however, between where transportation fuels are produced and where they are consumed. To address this imbalance, pipelines, railroads and barges transport between regions more than 4 million barrels per day of fuel products. In doing so, an intricate system of infrastructure has developed to accommodate multiple fuel specifications (which often vary from region to region) and to satisfy demand for increasing volumes of biofuels. Each segment of the distribution value chain has developed capabilities to efficiently handle these multiple fuel products, but this has increased the complexity and limited the flexibility of the system to accommodate new products.

The report describes the flow of product throughout the system and evaluates the specific considerations affecting operations at bulk storage terminals, product pipelines, barges and railroads, distribution terminals, tanker trucks and motor fuel dispensing facilities. It also looks at the regulations affecting system operations and issues that could influence the expansion of biofuel products in the market.

"As the transportation energy market evolves, new fuels will be evaluated for their ability to deliver greater efficiency, lower emissions and enhanced consumer value," said Fuels Institute Executive Director John Eichberger. "Part of that evaluation must focus on the distribution system. If a new product cannot be efficiently delivered to consumers, it will never be able to deliver its anticipated value. Likewise, if a new product disrupts the system, the impact on consumers could be significant. A first step to avoiding unintended consequences and investing resources on viable and sustainable solutions is to understand the current system. This report delivers that high-level overview essential to such considerations."

Listen in on a NACS Convenience Matters podcast, where Jeff Lenard of NACS and Eichberger discuss the U.S. supply chain with Jeff Quigley, director of analytics and modeling at Stratas Advisors. Understanding the fundamentals of this complex system is essential for anyone considering introducing a new product to the market.