In 2024, the US West Coast has seen jet fuel inventories surpass the previous five years’ levels for most weeks, according to the US Energy Information Administration (EIA). For 29 out of 35 weeks, the inventories have been higher than the average for the same period from 2019 to 2023. This surplus has led to a significant drop in Los Angeles’ regional crack spreads for jet fuel, averaging just 5 cents per gallon in August, the lowest in five years, including the COVID-19 pandemic’s early stages in 2020.
Crack spreads are the price difference between petroleum products and crude oil, indicating the profitability of producing these products for refineries. West Coast jet fuel inventories peaked at over 12 million barrels in the week ending September 6, exceeding the five-year average by more than 20% every week since mid-July. The increase in inventories is primarily due to higher refinery production and a decrease in jet fuel demand compared to pre-pandemic times.
Despite higher demand in the first half of 2024 compared to the last four years, jet fuel consumption on the West Coast has not returned to 2019 levels, as per the EIA’s Petroleum Supply Monthly. Factors contributing to this include a slower recovery in international air travel, particularly to Asia, a slower rebound in West Coast air travel compared to the national average, and improved aircraft fuel efficiency.
Refiners on the West Coast continue to produce substantial amounts of jet fuel to maintain gasoline production, which constitutes the majority of the region’s refinery output. However, they face limitations in increasing gasoline yield as they must also produce a certain volume of jet fuel or distillate fuel oil for each barrel of crude oil refined.
Jet fuel and distillate fuel oil are often grouped as middle distillates. While jet fuel has a higher energy content than conventional distillate fuel oil, it does not need to meet the same sulfur standards as ultra-low sulfur diesel, the most common form of distillate fuel oil. Refiners can adjust their production of these two fuels by modifying their crude oil mix and processing equipment, depending on market demands.
The EIA’s Weekly Petroleum Status Report shows that West Coast refineries have produced more jet fuel than distillate fuel oil in 26 out of 35 weeks this year. In the first six months of 2024, jet fuel production as a percentage of total output was higher in five months, according to the EIA’s data. This contrasts with 2023, when jet fuel yields exceeded distillate yields in only four months, and from 2019 to 2022, jet fuel yields never surpassed distillate yields on a monthly average.
The higher production of jet fuel relative to distillate fuel oil has helped maintain overall refinery output close to pre-pandemic levels, despite refinery closures and reduced operational capacity since 2019. In contrast, distillate production in the region has generally declined, with the first half of 2024 averaging 395,000 barrels per day, down 30% from 560,000 barrels per day in 2019. This decrease may be due to competition from the growing use of renewable diesel fuel, which can be easily blended with petroleum diesel and used in diesel engines.