What Is It – PADDs (Petroleum Administration for Defense Districts)

By Published On: August 24, 2022Categories: Daily Market News & Insights, What Is It Wednesday

Welcome to our continuing FUELSNews series: What Is It Wednesday. Each week, we’ll pick a fuel industry topic to explain, so you can learn more about the market and what drives it. Want to suggest a topic? Email the author, Alan Apthorp, at aapthorp@mansfieldoil.com.


When evaluating oil markets, there are a few different ways of segmenting the country. Often, industry sources will use basis markets, comparing Gulf Coast, New York Harbor, and Chicago regions against each other. But one of the more popular methods of segmenting the country for non-industry members is by PADD – a term utilized heavily by the EIA. What are these mysterious regions, and why does the government look at energy that way? And how many are there? The answer might surprise you.


What Is a PADD?

According to the EIA:

The Petroleum Administration for Defense Districts (PADDs) are geographic aggregations of the 50 States and the District of Columbia into five districts: PADD 1 is the East Coast, PADD 2 the Midwest, PADD 3 the Gulf Coast, PADD 4 the Rocky Mountain Region, and PADD 5 the West Coast. Due to its large population, PADD 1 is further divided into sub-PADDs, with PADD 1A as New England, PADD 1B the Central Atlantic States, and PADD 1C comprising the Lower Atlantic States.

It’s worth noting that there are technically seven PADDs total, but PADDs 6 and 7 virtually never receive mention in the context of oil and gas. PADD 6 covers the US Virgin Islands and Puerto Rico, and PADD 7 covers American Samoa, Guam, and the Northern Mariana Islands Territory.

Where Did PADDs Come From?

During World War II, the country needed a way to ration fuel so it could support the war effort. An executive order created the Petroleum Administration for War in 1942, which divided the country into five districts. Abolished in 1946, the PAW paved the way for the Defense Production Act of 1950, which formalized the five districts as PADDs. Management of the PADDs and their energy resources was transferred to the Department of Interior and ended in 1954. Although the federal government no longer actively manages the flow of energy across regions, the groupings have held in both government policy and reporting ever since.


Let’s Meet the PADDs

The five PADDs typically utilized by the EIA cover the continental US, Alaska, and Hawaii. Here are a few quick facts about each:

PADD 1 East Coast – The East Coast is the most populated region, making it one of the highest fuel demand areas. However, lacking notable refining capacity, the region is reliant on imports by barge or pipeline. This is the only PADD divided into sub-regions. PADD 1B receives much attention because it includes New York Harbor, where the NYMEX fuel contracts settle. PADD 1C is a competitive fuel district, supplied by just two pipelines and some coastal barge shipments from the Gulf Coast.

PADD 2 Midwest – The Midwest has risen to prominence over the past decade as its refining capacity has grown. Historically, fuel was produced or imported into the Gulf Coast, then shipped north into PADD 2; that dynamic has reversed. Chicago refiners now look for opportunities to push their products eastward and south to capture market share in new areas. Most of the oil refined in PADD 2 comes from Canadian oil fields.

PADD 3 Gulf Coast – The Gulf Coast is the refining hub of the world, refining just shy of 10 million barrels per day of fuel at its peak in 2020. It’s also the most prolific US region for oil production. As such, the Gulf Coast tends to push its products outward, either north to PADD 2, east to PADD 1, or via exports to other countries. Given its position, the region is susceptible to annual hurricanes that disrupt production and refining.

PADD 4 Rocky Mountain – The Rocky Mountain region is the US’s least populated area, so it takes relatively fewer gallons to keep consumers happy. The area relies on a few local refineries to cover local demand, combined with a patchwork of pipeline shipments.

PADD 5 West Coast – The West Coast is somewhat of an island in terms of fuel infrastructure, with little or no pipelines to the rest of the US. California has a vast population, but strict environmental regulations mean that nearly all its fuel is produced locally or shipped from certain Chinese refineries. Crude oil is similarly produced locally or imported. Some fuel is pushed eastward, but no fuel pipelines flow from PADDs 3 and 4 into PADD 5.


Where Can I Learn More about PADDs?

PADDs are primarily helpful for tracking oil flow within and outside of the US. Many reports published by the EIA are broken down by PADD, as you can see here.

For a detailed map and analysis of PADDs and their infrastructure, you can check out the following EIA pages:

East Coast & Gulf Coast Transportation Fuels Markets

Midwest & Rocky Mountain Transportation Fuels Markets

West Coast Transportation Fuels Markets

This article is part of Daily Market News & Insights


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The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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