Key Takeaways
The Midwest has a firm supply of oil from western Canada and excess refinery capacity but lacks the infrastructure to move gasoline and diesel to East and West Coast markets, where refining capacity has declined due to retirements, conversions, and closures.
Refinery output in the Midwest is up 17% since 2000, while California has lost 30% of its refinery capacity in the last 5 years.
Buckeye Partners is expanding its Laurel Pipeline system to the East Coast, and the proposed Western Gateway pipeline will connect Illinois to Los Angeles, providing needed petroleum supply and easing gasoline and diesel prices in coastal markets.
Buckeye Partners has already activated bi-directional refined product service on its Laurel Pipeline, moving Midwest fuel from Michigan, Ohio, and Pennsylvania into eastern Pennsylvania and upstate New York.
The Western Gateway pipeline creates a new fuel supply corridor originating in St. Louis, Missouri, and extending Gulf Coast receipt points to the West Coast; construction will begin once permits and regulatory approvals are received, with an expected completion date of 2029.
U.S. Midwest refiners have large refineries that produce more gasoline, diesel, and jet fuel than the regional market can use, but they have limited pipeline and waterborne access to move surplus barrels to coastal markets. The Midwest has over 4.2 million barrels per day of refining capacity—24% of the U.S. total — and produces more gasoline and diesel than local populations consume. That contrasts with the East and West Coasts, where refining capacity has declined due to retirements, conversions, and closures. To fill the deficit, Midwest refiners want to replicate U.S. Gulf Coast refiners’ infrastructure and branch into East and West Coast markets. Expanding Buckeye Partners’ Laurel Pipeline system to the Atlantic Coast and building the proposed Western Gateway pipeline connecting Illinois to Los Angeles could open East and West Coast markets to them, providing needed petroleum supply and easing gasoline and diesel prices in coastal markets.
Since 2000, the Midwest has gained 17% in overall refining capacity, due mainly to the availability of heavy crude oil from Western Canada. The Midwest now has more than 4.2 million barrels per day of refining capacity, including 1.5 million barrels per day in the four states closest to the East Coast (Indiana, Kentucky, Michigan and Ohio). Since 2000, refining capacity in the Northeast (primarily at 5 refineries in Delaware, New Jersey and southeastern Pennsylvania) has fallen by half, to about 900 thousand barrels per day due to lack of pipeline access to U.S. shale oil and to other events, such as a fire at the Philadelphia Energy Solutions refinery in Philadelphia, which led to its shutdown.
After FERC approved regulatory and tariff filings on September 10, Buckeye Partners activated bi-directional refined product service on its Laurel Pipeline, which can move Midwest fuel from Michigan, Ohio, and Pennsylvania into eastern Pennsylvania and upstate New York, adding up to 80,000 barrels per day of incremental capacity. The approval comes as Middle East supply disruptions have reduced gasoline exports from Europe and Eastern Canada to the U.S. East Coast. The Northeast also receives petroleum product supply from U.S. Gulf Coast refineries via the Colonial Pipeline. Citgo was the first refiner to publicly confirm on October 1 that it had begun shipping gasoline east from its Lemont, Illinois, refinery via the expanded Buckeye system.
The Western Gateway pipeline is an estimated $5 billion project backed by Kinder Morgan, Phillips 66, and HF Sinclair to connect U.S. Midwest and Gulf Coast supplies to Arizona and California. California has been closing or converting refineries to biofuels, which has pushed gasoline and diesel prices $1.50 to $2.00 per gallon above the national average. The state has lost more than 30% of its refining capacity in five years. Recent refinery closures include Phillips 66’s Wilmington refinery in October 2025 and Valero’s Benicia plant in April 2026. The state increasingly relies on waterborne imports to fill the gap, importing 20% of its gasoline from Asian refiners and adding to higher costs. Middle East disruptions have recently reduced Asian supply, and West Coast gasoline inventories have remained below year-ago levels through the summer of 2026.
Phillips 66, Kinder Morgan, and HF Sinclair made a final investment decision on August 11 to begin development of the 1,300-mile Western Gateway pipeline system, with a design capacity of 230,000 barrels per day. It is expected to be completed in 2029, subject to obtaining permits and regulatory approvals. Phillips 66 will construct and operate a new pipeline of about 900 miles from its Borger, Texas, refinery to Phoenix, Arizona, while its Gold Pipeline, after being reversed, will connect to the Explorer Pipeline and allow Midwest refined products to flow toward Borger. Kinder Morgan will reverse its existing SFPP West Line, running from Colton, California, to Phoenix, to move product east-to-west into California.
Beyond helping California, the Western Gateway Pipeline will fill a gap in Arizona, as the state has no oil refineries of its own and much of its gasoline comes from California. The Western Gateway pipeline is expected to deliver up to 200,000 barrels of gas a day to Arizona, nearly double the amount Phoenix gets from an existing pipeline. Kinder Morgan has been operating in the state and across the West Coast for decades and owns several pipelines in Arizona.
Conclusion
The Midwest has a firm supply of crude oil from western Canada and excess refinery capacity but lacks the infrastructure to move gasoline and diesel to East and West Coast markets, where refining capacity has declined due to retirements, conversions, and closures. To address the infrastructure gap, Buckeye Partners is expanding its Laurel Pipeline system to the East Coast, and the proposed Western Gateway pipeline will connect Illinois to Los Angeles, providing needed petroleum supply and easing gasoline and diesel prices in coastal markets. Buckeye Partners activated bi-directional refined product service on its Laurel Pipeline, moving Midwest fuel from Michigan, Ohio, and Pennsylvania into eastern Pennsylvania and upstate New York. The Western Gateway pipeline creates a new fuel supply corridor originating from St. Louis, Missouri, and expanded Gulf Coast receipt points to the West Coast. Once it obtains permits and regulatory approvals, construction will begin, with an expected completion date of 2029. These steps should improve the circulation of refined products in the United States and benefit consumers.
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