Crude oil markets offer opportunities in nearly all market conditions but can be highly volatile. Several factors impact prices, directly (pipeline changes) or on a macroeconomic level (i.e., economic health, weather), making price risk management is critical. ~ The CME Group – Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX) and New York Mercantile Exchange and Commodity Exchange, Inc. (COMEX)

1. HAWAII
COST OF GASOLINE
ENTRY - TRANSFER POINTS
CRUDE OIL/REFINED CRUDE OIL (GASOLINE/DIESEL/AVIATION GAS)
HONOLULU HARBOR
Honolulu Harbor only handles refned petroleum products. The pipelines of
the energy corridor [See below for details on the energy corridor] convey
petroleum products to several tank farms owned by diferent fuel companies
located around Pier 30. Fuel from the tank farms is then loaded onto barges
for shipment to the neighbor islands or is distributed on Oahu.
Current fuel-related harbor operations include:
1. Of-loading Handysize Tankers at Pier 51 that brings in jet fuel,
refned petroleum products and ethanol to Oahu. {Emphasis Supplied]
2. Loading fuel barges for shipments to the neighbor islands at Pier 30.
3. Providing berthing for bunkering barges. Bunker pipelines are along
Piers 31 and 32.
KALAELOA BARBERS POINT HARBOR
Crude oil is of-loaded at two ofshore mooring systems south of Kalaeloa
Barbers Point Harbor. Kalaeloa Barbers Point Harbor serves as the hub of
Hawaii’s fuel supply system as well as for the inter-island distribution of
fnished petroleum products. Kalaeloa Barbers Point Harbor is located only a
short distance away from Hawaii’s two refneries, a gas production plant, a
number of large fuel storage tank facilities and is the terminus of the regional
pipeline between Barbers Point and Honolulu. An interconnecting pipeline
system connects the harbor to the refneries. Refned products are then
transferred from the refneries to Honolulu Harbor by pipelines.
The two fuel facilities in Honolulu harbor for interisland fuel shipping are
located at Piers and 30 and 51.

2. Pier 30 and its associate storage facilities are privately owned. [Privately
owned by Island Energy Services LLC, previously Chevron]
Bunkering pipelines for fueling vessels are located at Piers 31 and 32.
Petroleum fuel is pumped from the two refneries that are located at Barbers
Point to Honolulu locations by transmission pipelines, also referred to as the
“energy corridor”.
The pipeline system for liquid petroleum products on Oahu energy corridor
comprises of two independent pipeline systems: one dedicated to black oil
and the other to clean petroleum products. The petroleum products in each
pipeline are conveyed in batch trains through the pipelines.
A large jet fuel storage facility, operated by Hawaii Fueling Facilities
Corporation (HFFC), is located west of Sand Island near the former
Kapalama Military District. The storage facility receives jet fuel either
through the energy corridor from Barbers Point or through jet fuel
imports at Pier 51.
Source: Statewide Fuel Facilities Development Plan – Fuel Facilities in Hawaii’s
Commercial Harbors. State of Hawaii, Department of Transportation, Harbors
Division. 2009, accessed April 8, 2018 https://hidot.hawaii.gov/harbors/fles/2013/01/Statewide-
Fuel-Facilities-Development-Plan-Part-1.pdf
___________________________________
U.S. ENERGY INFORMATION ADMINISTRATION
HAWAII – STATE PROFILE AND ENERGY ESTIMATES
October 19, 2017, accessed April 8, 2018
https://www.eia.gov/state/analysis.php?sid=HI
Profle Analysis – Petroleum
Hawaii has no proved petroleum reserves or production, but it does produce
petroleum products. The state has two crude oil refneries, located in the
Honolulu port area on Oahu. Both can produce a broad range of refned
petroleum products and have been supplying almost all of Hawaii's demand.

3. Refnery feedstock is most often light sweet crude oil imported from Pacifc Rim
producers, although crude oil is also imported from Russia, Africa, and the
Middle East. Refned petroleum products, chiefy jet fuel and propane, are also
imported from Asia, Canada, the Caribbean, South America, and Europe.
Hawaii has no inter-island pipelines. Crude oil is ofoaded to storage tanks in
the Oahu refnery area through ofshore mooring systems, and refned products
are loaded at Honolulu harbor terminals onto fuel barges for distribution to
other islands.
The transportation sector uses almost two-thirds of all petroleum consumed in
Hawaii, and the electric power sector uses about one-fourth. Jet fuel accounts
for more than half of all transportation fuels consumed in the state, and,
because of signifcant demand from military installations and commercial
airlines, jet fuel makes up a larger share of total petroleum consumption in
Hawaii than in any other state except Alaska.
In 2006, Hawaii imposed a statewide requirement that all motor gasoline be
blended with 10% ethanol, with the goal of spurring creation of local ethanol
industry using locally grown feedstocks; however, no ethanol refneries have
been built in the state. All ethanol for blending with motor gasoline is shipped
in, primarily from Brazil. As of 2016, Hawaii eliminated the statewide ethanol
blending requirement.
U.S. ENERGY INFORMATION ADMINISTRATION
HAWAII STATE ENERGY PROFILE
October 19, 2017, accessed April 8, 2018
https://www.eia.gov/state/print.php?sid=HI
CRUDE OIL REFINERY CAPACITY (AS OF JAN. 1)
HAWAII SHARE OF U.S. PERIOD
147,500 barrels/calendar day 0.8% 2017
Note, Supplied. “Total crude oil capacity is not gasoline production, distillate
production, diesel fuel production or production of other products. Production
potential, capacity, varies depending on time of year and status of the refnery.
A rule of thumb is that roughly 50 percent of total capacity is gasoline
production.” Source: California Energy Commission Fuels Ofce.
http://www.energy.ca.gov/almanac/petroleum_data/refneries.html

4. CALCULATION, SUPPLIED
HAWAII REFINERIES CRUDE OIL PROCESSING CAPACITY
53.8 MILLION BARRELS PER YEAR.
[147,500 barrels/calendar day x 365 days (Calendar Year)
= 53,837,500 barrels per year]
________________________________
CONSUMPTION
HAWAII
PETROLEUM U.S. AVERAGE PERIOD
42.6 MILLION BARRELS 0.6% 2015
PRICES
HAWAII
PETROLEUM PRICE U.S. AVERAGE PERIOD
DOMESTIC CRUDE OIL
FIRST PURCHASE Withheld $56.98/barrel Dec-17
Note, Supplied.
HAWAII STATE ENERGY OFFICE
1. DOMESTIC Crude Oil/Refned Crude Oil (Gasoline/Diesel/Aviation Gas) is
Crude Oil/Refned Crude Oil (Gasoline/Diesel/Aviation Gas) FROM CALIFORNIA
AND ALASKA.
2. FOREIGN Crude Oil/Refned Crude Oil (Gasoline/Diesel/Aviation Gas) is
Crude Oil/Refned Crude Oil (Gasoline/Diesel/Aviation Gas) FROM OTHER
THAN CALIFORNIA AND ALASKA.
“HAWAII'S OIL MARKET: A TALE OF TWO REFINERIES”
University of Hawaii Research Organization
January 29, 2013, accessed April 8, 2018
http://www.uhero.hawaii.edu/news/view/206

5. Hawaii is an extremely small part of global oil markets (almost 90 million
barrels per day). Hawaii consumes 100-145 thousand barrels per day (kb/d) of
petroleum products with fuctuations since the early 1980s. Currently the state
has two small refneries: Chevron {Acquired by Island Energy Services LLC] and
Tesoro [Acquired by PAR HAWAII]. Chevron's Hawai'i refnery was built in
1962 to supply the growing fuel market in Hawaii. Its crude distillation capacity
was initially 33 kb/d, but has since been expanded to 54 kb/d. The Tesoro
refnery was built as a 30 kb/d facility in 1970 by a company called Pacifc
Resources International (PRI). That facility changed hands twice—in 1989 to
BHP, an Australian mining and oil company, and again in 1998 to Tesoro. After
being upgraded and expanded several times, the refnery’s capacity is now
nearly 94 kb/d, 75% larger than the Chevron facility. [Clarifcation Supplied]
The total refning capacity of both facilities, nearly 150 kb/d, has exceeded
Hawaii's demand for refned products for quite some time, and Hawaii's
demand for oil is actually expected to shrink further due to a variety of factors.
One factor afecting the prospects for Hawaii's petroleum market is the Hawaii
Clean Energy Initiative (HCEI), whose express purpose is to gradually wean
Hawaii's economy of oil. Other factors include, but are not limited to, the
possible introduction of Liquefed Natural Gas (LNG) into Hawaii's energy mix,
existing and future environmental regulations that may limit the use of
petroleum products (such as burning fuel oil to produce electricity and/or
marine transportation), increased EV penetration and improved fuel economy
in the ground transportation sector, and fat to moderate economic and
population growths in short- to medium-term future.
In addition, in today’s worldwide refning industry, the most proftable facilities
have the following characteristics:
– large enough to achieve economies of scale [current average-sized refnery
worldwide is about 400 kb/d]
Note, Supplied. It is unlikely that new refneries will be built in California. In
fact, from 1985 to 1995, 10 California refneries closed, resulting in a 20
percent reduction in refning capacity. Further refnery closures are expected
for small refneries with capacities of less than 50,000 barrels per day.

6. The cost of complying with environmental regulations and low product prices
will continue to make it difcult to continue operating older, less efcient
refneries. Source: California Refneries. California Energy Commission Fuels Ofce.
Accessed April 8, 2018 http://www.energy.ca.gov/almanac/petroleum_data/refneries.html
– small enough relative to the local market to sell all of its production in
the local market regardless of its operating strategy
– in a market where imports of all products are required (to have a
natural price foor through import-parity pricing).
Hawaii's refneries do not enjoy any of these conditions!
Taken as a whole, it is clear that the closure of at least one of Hawaii's
refneries was expected, and baring some signifcant improvement in the local
refning industry, Chevron [Acquired by Island Energy Services] may very well
follow Tesoro’s [Acquired by PAR Hawaii] conversion to an import facility.
[Clarifcation and Emphasis Supplied]
________________________________
CALIFORNIA REFINERIES
Barrels CARB CARB
per-day Diesel Gasoline
Chevron U.S.A. Inc.
El Segundo Refnery 269,000 Yes Yes
Tesoro Refning & Marketing Company
Carson Refnery 257,300 Yes Yes
Chevron U.S.A. Inc.
Richmond Refnery 245,271 Yes Yes
CARB - California Air Resources Board
Source: California Energy Commission Fuels Ofce, Cited Above