Thank you, Doug. Good morning, everybody. Well, the first analyst presentation I think I did last year after it was announced that I was going to be the CEO was this one. It was such a traumatic experience, I didn't do another one the rest of the year. I'm kidding. Actually, Doug's first question to me last year was, "Joe, what are you going to do different than Bill?" I thought if I answered that question, I'd probably get fired before I got a chance to take the role. Anyway, we're really pleased to be here with you this morning.
The questions you posed, Doug, are the questions that seem to be on everybody's mind. I think we'll speak to some of them as we go through the formal presentation, but then certainly I'll finish early enough for us to take some questions and Lane and I, and Ashley will do our best to try to give you our perspective on these things. So obviously, we have the Safe Harbor Statement, which I won't dwell on. Let me talk here about Valero. We are the world's largest independent refiner. We have 15 refineries with 2.9 MMbpd of highly complex refining capacity, and over 70% of that is located in the U.S. Gulf Coast and the Mid-Continent.
We have a substantial logistics business which led us in 2013 to execute an IPO, which led to the creation of Valero Energy Partners, which is a traditional logistics MLP with 100% fee-based revenues. We also have a substantial marketing business, a wholesale marketing business. We have 7,400 sites. Those sites are branded Valero primarily in the United States. They're Ultramar in Canada. Then if you go over to the U.K. and Ireland, we have the Texaco brand. We have a significant renewable fuels business, which we grew a bit more last year. We have 11 corn ethanol plants, and we have a 50% ownership interest in a renewable diesel plant. So we're a fairly large player in the renewable fuels business. Now, this map shows really the location of all of our assets. It's an important map.
If you look at the teal-colored states, those are the ones where we have a marketing presence. If you look at those with the V logo, that's where we have a branded marketing presence. So you can see that we've got the country pretty well covered with the brand. Then if you see the refinery icons, which are the third one down there, you can tell the locations of our plants. We have two refineries on the West Coast, one up in the San Francisco Bay Area, and then one down in the Los Angeles area. If you go all the way over to the east, you can see in the upper right corner the Jean Gaulin Refinery, which is located in Quebec City. Then if you look at the bottom there, we have our Pembroke Refinery, which is in Wales.
I covered the coast first because really one of the points I'd like to make is that if you look at the remainder of our refining capacity, it's located in the U.S. Gulf Coast and in the Mid-Continent. We've got a slide later in the deck, it's slide 51, which speaks to the advantages of these. I mean, we all know that Cushing's building, that the discounts for crude in the Mid-Continent are expanding. Our thesis is that discount crude is working its way to the U.S. Gulf Coast, and we're going to be able to take advantage of that. The further to the west that you are in the U.S. Gulf Coast, the greater that advantage is, and that's what you can see from slide 51 back in the deck. Our corn ethanol plants are located in the Upper Midwest.
You can see they're very close to the source of supply, feedstock supply for them. The table on the left provides you with some more information about our refining system, including the throughput capacities and the complexities. Doug mentioned some of the things that he's looking at. There are three major trends which we're really attentive to, and you know all of these. The first is the increased production of crude, natural gas, and NGLs, which is really benefiting refining in the U.S. We have increased demand for products globally, and that's beneficial to us because, as you know, our products can be put on a ship. They're fungible, they can be moved long distances, and we can be very competitive doing that. Which takes us to the last point, which is the location advantage of the Valero system.
This is very important to us. We have our refineries in the Gulf Coast and the Mid-Continent. They have great access to the natural resource advantages we're talking about, but they also have the Gulf Coast, has the added advantage of being able to export barrel products. This chart speaks to the growth in the crude production and the natural gas production here domestically. If you take a look at the chart on the right, you can see the line indicates where production has gone, and you can see the steep ramp-up really starting in 2011. You can see the associated impact that this has had on imports.
The imported crude that's been backed out of the market is really primarily the light sweet crude, the West African crudes, that have come into the U.S. Gulf Coast because we have the abundant supply of light sweet North American crude now, the foreign crudes haven't been competitive. You look at the right, you can see the increase in natural gas production. Obviously, what this is doing is keeping pressure on natural gas prices, which from a refiner's perspective is significant to us because it makes up a significant component of our operating expense. I think in the Valero system, we consume around 866,000 MMBtu per day of natural gas. So although we don't have the pricing on here, a dollar change in natural gas price, it has a material effect on our P&L.
Now the second trend that we talked about on that page was the world petroleum demand growth, and this chart just shows you what that is forecast to do. We can see where 2015's estimate is, and you can see where 2016's forecasted to be, and it is about 1.3 MMbpd for those two years. The other thing to point out, though, is that the bulk of that growth is coming in the non-OECD region. The U.S. has some modest growth. Europe would be suffering here a bit. But the growth in the developing countries is significant. Now, did I miss it? Sorry, guys. Okay, there we go. All right, there we are. Okay.
Now this speaks to growing market share of U.S. exports, and if you look at the chart on the left here, very clearly you can see where the export products are coming from, the bulk of which is in PADD 3, which is the U.S. Gulf Coast. If you look at the chart on the right, you can see the destination for those exports. Primarily, the growth is coming from Latin America. That positions U.S. Gulf Coast refining very well to take advantage of that. I noticed when we were flying up here the other day that the EIA has taken these numbers of product exports to 4.4 MMbpd, almost 4.5 MMbpd in December. You can see that is materially higher than what we have on the chart.
Now, I am not 100% sure it is apples and apples, but in their case, that was made up of gasoline, diesel, and LPGs. Diesel exports were almost 1.2 MMbpd , which is pretty solid. That is the output of a lot of very large refineries. Okay. Now for Valero's strategy, and we are focused on trying to enhance shareholder returns. We are focused on multiple things here, the first of which is operations excellence. This has been a focus for the company for some period of time, and it begins with safety, and it goes to environmental performance, and then all of that leads to higher reliability, higher run rate, and of course, higher profitability. Lane and his team have done an absolutely great job of continuing to drive the focus on operations excellence.
We are also committed to producing capital returns to stockholders, and I will speak more about that in a minute. But we are doing this through a very disciplined capital allocation process. The third point we have here is we have a very rigorous capital project screening process that is really requiring the projects to have higher returns before they can even work their way into the process, because once a project starts working its way through the process, we spend money on it. A lot of engineering money is spent as you go through project development, and what we are trying to do is assess very quickly if a project is going to be feasible or not. If it does not have a high rate of return from the get-go, it does not even embark into the process.
Now, the target for these capital investments, I will talk more about in a minute, but we have continued to invest in our refining operations, and we are looking at expanding our logistics investments also. The final point on this page is unlocking the asset value, and this is really the implicit value that we see that we have in our logistics assets. I am sure all of you saw, we announced a drop-down of $671 million transaction between Valero Energy and VLP at the end of the month. That transaction is beneficial to both Valero and to VLP, as we grow the logistics business and as Valero capitalizes on the higher multiple that those cash flow streams bring back. Okay. I spoke about operations excellence. I think this chart and the next couple will demonstrate to you my view that we are the best out there.
You can see on the left, we have our personal safety stats. 2014 was our employees' lowest injury rate in company history, and the combined injury rates between our employees and our contractors was also the lowest that we have ever had. As you can see from the line, our rates are about half of the industry average. Then if you go over to the chart on the far right, you can see that from an environmental perspective here, we have made great progress reducing our total air emissions, and this results from startup shutdowns and then malfunction events. So the focus that we have on safety, environmental, and regulatory compliance is really paying off in the system. Here is another chart that will show you how we are doing. What we have here on the right is essentially the results of surveys that are done on performance metrics.
It is a biannual survey, and this is the last six years' data points. You can see we got the numbers in there for 2008, 2010, and 2012 as represented by the balls. The different bands within each bar are where you fit in that particular quartile. As you can see, we are very high. We have continued to improve in mechanical availability, and this is for the entire portfolio, okay? Lane can speak to the probability of having 15 refineries that could all be first quartile. It is pretty tough. Anyway, we have got seven that are first quartile for mechanical reliability. We have also improved our performance in personnel, maintenance, non-energy CapEx, and energy intensity. All this goes to having the most efficient operations out there.
We feel very good about what we have been able to achieve, and these categories of performance continue to be a primary focus for Lane and his team. So you say, "Well, what does all that mean?" What it means is that you can operate your refineries at very high utilization rates, which we have demonstrated the ability to do here over the last couple of years, as you can see from these bars. Then within our system, it is one thing to run very well. You also have to optimize the operations to take advantages of what the market is giving you. That is really what you can see from this graph on the right. It gives you the range of flexibility that we have within our Gulf Coast refining system to take advantages of different feedstocks.
And you can see how broad these ranges are, heavy sour crudes, medium sours, sweets, and residuals, and then the other feedstocks. This allows us to optimize the feedstock slate to take advantage of what the market's giving you. We talk about this a lot in the one-on-one meetings that we have. What does this change in Brent/WTI do to you? What does the change in heavy sour discounts do to you? They all have an effect, but we are able to take advantage of whatever happens to be in favor at that point in time. The last point I will make on this chart is that not only does our system have the flexibility to do this, but we have a commercial group that is very effective at adjusting these things very quickly.
You are running the linear programming models all the time, and the signals that are being sent out are going to the crude and the products guys, and they are making changes as they need to. I think we are the best at this in the business and the quickest to respond. Okay. We get asked a lot about the two most significant investments, I would say, that we have had in the company over the last several years, and that is the two major hydrocracker projects, one at Port Arthur, one at St. Charles. We will probably quit showing this to you here at some point in time because the bottom line is that the units started up very effectively. They are producing the high-quality diesel that we expected to get when we built them, and the economics are on target.
We have $800 million of EBITDA that we estimate we have got from these units over the last four quarters. The estimate that we gave was $780 million. So we are right on top of the estimate, and the benefits that these units are providing are significant, but they have enabled us to increase our margin capture rate and also increase the throughput through the refinery as we have debottlenecked them. Both projects have been very good, and we are pleased to have them as part of the portfolio. Now let me shift and talk a little bit about capital returns to stockholders. As I mentioned earlier, we are taking a very disciplined approach to capital allocation, which you can see from this chart below here. We broke our use of cash up into two categories, non-discretionary and discretionary.
On the non-discretionary segment, we got the sustaining CapEx, and that is the money that we feel we need to spend every year to be sure that our system stays safe and reliable. That includes turnaround expense for us. So it is split probably 50/50 between maintenance and turnaround expense. If you go over to the next dialog box there, you see the dividend growth. I will speak in a moment about what we have done, but we are committed to having the dividend as a fundamental part of our use of cash.
Then if you go over to the right, you can see that we have got that titled debt and cash. Really what that states is that we are committed to maintaining our investment-grade rating. That is important to us, particularly with a sponsored MLP, because sponsored MLPs tend to have credit ratings that are one notch subordinated to the parent.
We need to stay in this BB B credit rating to assure that VLP, when we do go seek a rating for it is going to be investment grade, so it has the proper access to the capital markets. We backed into that target debt-to-CapEx that is shown there, the 20%-30%, based on the resulting coverage ratios that we would have at debt levels that were a bit higher. Okay? We are using our commitment to the investment grade rating really as a constraint on the use of cash within the organization. Those are the non-discretionary components. If you look below, you can see the discretionary pieces. There we have the stock buybacks, the growth CapEx, and acquisitions. The point I would really like to make with you is that there is competition within the Valero system now for the use of funds.
That is a shift in priority for us. Historically, as I think you guys would know, there was a period where everybody thought there was nothing we would not buy. Then there was a period where they thought there was not a project that we did not want to build. Now we are looking at all of those and saying, "Okay, is the project good enough to invest in when it is compared to a share repurchase?"
So it is a little bit different way for the management team to look at it, and we are all on board with it. I spoke about the return of cash via dividends and stock buybacks, and I think you can see that on this chart. As many of you know, we increased the dividend by 45% at the end of January from $1.10 a share per year to $1.60 per share per year.
That follows on a series of more modest dividend increases. So we have been doing this for a while, but we decided to go ahead and increase it materially, and a lot of that had to do with the fact that our payout ratio was very low, particularly as it compares to the peer group. We also increased our stock buybacks at the end of the year, and we ramped up slowly through the year. I think we had $4 million in the first quarter and $4 million in the second, and then finally in the fourth quarter, we did 10 million shares. So we ramped up our share buybacks as the year went along, and if you aggregate all this together, we returned somewhere $1.8 billion-$1.9 billion to shareholders last year.
Now you can see the buyback number is fairly low in the first quarter, and there is really a good reason for that. We were blocked out for a couple of weeks from buying back shares knowing that we were going to recommend a dividend increase at the end of January. Then we were blocked out for the last couple of weeks of February because we knew we were going to do a material transaction between VLO and VLP. So we have not had the opportunity to be in the market to buy back shares. So I do not want you to look at that number and go, "What are these guys doing?" Our plan would be to continue with buybacks to try to exceed this payout ratio, this target payout ratio that we have of greater than 50% of earnings.
It would be our goal to try to maintain that as a goal for the company going forward. We talked about our disciplined capital investment review process, and if you take a look at 2014, you can see that actual capital spending came in at $2.8 billion. That is down from the $3 billion that we told you all when we spoke here last year. I am going to attribute that decrease to the rigorous management that Lane and his team have in assessing our capital expenditures. Because we did the projects that we planned to do, but we shaved everything out that did not need to be done. He was more efficient in the things we did do, and so it resulted in a $200 million savings. You see that we are reducing that capital budget further.
In 2015, we plan to spend $2.65 billion, with the bulk of that in refining going to the crude units and the hydrocracker project, the two hydrocracker expansions. The $400 million on logistics is primarily railcar expenditures. If you go over to 2016, you can see that we are further reducing the capital budget to $2.4 billion. The bulk of that is logistics. The biggest single component of that is the Diamond Pipeline, which we speak about in the back of the presentation. So our capital budget is certainly adequate, and it contains very good projects that allow us to earn very decent returns and are of moderate size. Of course, the logistics investments are those that we could then subsequently drop down to VLP.
Here we talk a little bit about our investments in our logistics assets as they are, and this really enables us to increase our feedstock flexibility and our product export capabilities. We are asked a lot about how we look at logistics investments. The logistics projects that we are taking on in these various categories really are born in the needs of Valero Energy. If, for example, we want to export more Eagle Ford crude out of Corpus Christi up to the Jean Gaulin Refinery, that is a project that is conceived at Valero Energy, developed at Valero Energy, and it is only after we decide that it is a good project and it makes sense for us that we would then run the project past VLP to see if it would be a good MLP project.
So these things that we are looking at on this page are projects that totally support Valero Energy's core business, which from our perspective then makes them viable and certainly candidates to drop. The refining projects that I mentioned are these two crude topper units, and these investments look very attractive. We are looking at spending $750 million on two new units, a 90,000 bbl a day unit at our Houston Refinery and a 70,000 bbl per day unit at the Corpus Christi R efinery. Both of these projects will be online in the first half of 2016. If you look over to the right, you can see what the economics look like on these projects. If you use 2014's actual price deck, the $750 million investment yields EBITDA of $500 million, which is a 50% unlevered IRR, so pretty solid.
We acid tested these projects with a price deck that had Brent and LLS at parity. In that scenario, they had 25% IRR. So that would be your worst-case crude oil export scenario. So very good projects, simple projects, not a lot of engineering complexity here, and we feel very good about having them upstream. Let me just say that they are optimization projects. We're not intending to drive significant increases in volume with these. What we're doing is backing out more expensive feedstocks in the system by running discount crude to produce those feedstocks. So they're more focused on optimization of the existing assets than they are volumetric expansions. Now, a couple other projects we're looking at. I mentioned the hydrocracker expansions earlier. We have just recently completed Meraux's 20,000 bbl per day expansion. That unit we run it pretty effectively here thus far.
We've got two expansions, minor expansions, one of the St. Charles hydrocracker and one at the Port Arthur hydrocracker. These are in process, and they'll be done in the second half of the year. Two projects we're looking at. One is the methanol plant, which we get asked about a lot. I would tell you we're still going through the gated capital review process on that, and we're really trying to decide if it's an investment that we want to make or not. We're evaluating an alkylation unit at the Houston Refinery. Both of these two projects take advantage of the discounted natural gas that we're enjoying and then NGLs. But commitments haven't been made to either of those projects to date. Now, you know we have the renewable fuels business, as I mentioned. The ethanol business had a great year last year.
They made $794 million, which is just incredible. If you look at it from inception to date, we've invested about $950 million in the business in total, and we produced $2.2 billion of EBITDA. So these plants are very good plants. They have the proper technology. They're located in the right spot. So we're location advantaged. We're also advantaged based on our scale. We also have implemented a lot of the best practices that we have at Valero Energy in these plants, which have enabled them to continue to improve their operations. So it's a very good business for us, and we're pleased to have it as part of the portfolio. Now, as for VLP, we've talked about it a lot, but just to give you some data points on it, VLP is a sponsored MLP. It's growth oriented. We're enjoying 100% fee-based revenues in VLP.
Valero owns the 2% GP interest, 100% of the IDRs, and almost 70% of the common units. The assets are highly integrated into our refining system. They're very well maintained, and we are going to use VLP as we continue to invest in logistics to grow this midstream portfolio. As you know, MLPs provide a very attractive cost of capital. Now, we just announced, as I mentioned, a transaction at the end of February to grow VLP. It was really the second drop-down transaction that we executed, and it was a $671 million deal. That brings the two drop-downs that we've done since we IPO'd at the end of December of 2013 to $800 million. Our goal is to drop $1 billion this year. So you can expect that we're going to have another drop-down transaction between VLO and VLP later in the year.
When we complete those, at the end of the year, we'll have annualized EBITDA within VLP of $200 million. We're growing it at a pretty good clip. Our target distribution growth rate is 25%, and we continue to remain committed to that. Based on what we've done to date, that's really not going to be a significant issue to maintain that. The drop-down transaction specifically included tanks, pipes, and pumps at our Houston and St. Charles Refineries. We entered into long-term agreements between Valero and VLP to assure the cash flow stream to VLP, but to also assure access to Valero Energy. These agreements include minimum volume commitments, and they're going to produce $75 million of EBITDA for VLP annually. The $671 million transaction was financed with $411 million of cash, $160 million of debt, and then $100 million of VLP common units.
All of that was paid to Valero Energy. We're asked a lot of times about, "Well, what is included in your logistics portfolio that you can drop?" We put this page in the deck, and you can see that it's varied between pipelines, racks, and terminal storage, rail, and marine. All what I would deem to be traditional logistics assets that have pretty consistent cash flow streams. The piece that we've added to this that's somewhat new and that we're looking at right now is the fuels distribution business. We do have a significant fuels distribution business. Mike Ciskowski and his team are working now to see which of those assets make sense to drop and what the order of magnitude might be for those.
We'll be announcing that here at some point when we have a real good line of sight to what it's going to be. With that, I'll wrap up here. We do feel that Valero is an excellent investment. We've got a great portfolio. We're excellent operators. We've got a great team. Our ethanol business has performed well and is the best position to take advantage of the margins when they're there. We are focused on our capital allocation, returning cash to shareholders, the discipline within our capital process. One of the key words that I'd just like you to keep in mind is that we're being very disciplined with the use of cash. Then we're focused on unlocking the implicit value of the assets that we have, the logistics assets that are tied up in Valero Energy today.
All this really drives us to this final point, which is our focus on multiple value expansion. We want to be the highest multiple refiner and not the lowest. Anyway, we're committed to trying to do that. That's the end of the prepared remarks that I had. Doug, I guess we'll open it up for questions.
Yeah, thanks, Joe. We've got the mics on? Great. Thank you. I believe to be able to have roving mics in the room, I think we should have them at the back. We'll open up for questions in one second. Joe, maybe I could kick us off. There's two brief topics I wanted to ask you about. One is, if you achieve that goal of having a higher multiple for Valero, what does it do to you in terms of strategic options? Secondly, there seems to be a fair amount of controversy around the issues of what happens when you drop MLP EBITDA to the refining business in terms of residual cost and volatility of that business. If you could speak to that as well, and I'll then open up the floor.
No, those are both very good questions, Doug. On the strategic option question, I'm trying to figure out how to answer this without creating a disclosure issue for myself. If you assume that there was an asset pool out there or a company that was for sale and it was attractive to you, and you knew that you could buy it and be the best operator and create synergies as a result, you'd be very interested in doing that. If you had to pay more for that asset, that set of assets, than your equity was valued at in the marketplace at a given time, doing that transaction would be dilutive to your shareholders. You would be better off taking the same cash that you're going to use to buy that new set of assets and buying back your own shares.
Having a higher multiple, which ultimately in this sum of the parts world that we're all dealing with, leads to a higher, I'll just make this up, dollar per complexity barrel. Okay? If we said your capacity in refining is worth X, and you've got to pay X plus for somebody else, you're not going to do it. You're better off making the own entity low-risk investment by buying back your own shares, particularly when you don't need to have this asset base in your portfolio because you already have a very good portfolio. To answer your question, your strategic options are a bit limited with the lower multiple because you're looking at transactions and they would end up being dilutive to your current shareholders.
That's just not something that we're willing to accept unless it was something that was just out there that we all looked at and said, "My gosh, strategically this is something that needs to be done." Then the accretion would be somewhat dependent on your ability to finance it, the capital structure you put in place for the transaction. I would say that the primary interest in getting the multiple up is to provide more strategic options for us. It's also great for our shareholders. The second point on the incremental expense associated with the assets that are being dropped from VLO to VLP. Doug was one of the first guys to really talk about this, and I think he's really got it right.
There's no way you can drop an asset from a parent to a sub, produce a return, give a return to that and not increase the expense back in the operating organization. The financial engineering going on all this is that, gee whiz, you're taking the four multiple cash flow stream and you're going to value it at 10x It depends what you do with the proceeds that you receive back at that 10 x, what effect it's going to have on the organization. That's why when we look at use of proceeds, we typically would model it in with we're going to repurchase Valero shares with the cash proceeds we get back. You may not be able to see it directly, but that would certainly be one of the uses of cash.
Therefore, although you're decreasing the numerator in a return on capital metric, you're also reducing the denominator. So you're not penalizing Valero Energy directly for the increased expense you're taking on an earnings per share basis. Okay?
Thanks, Joe. Questions from the floor. I think we have a microphone coming to you right here.
Joe, how do you think the crude inventory situation's going to resolve itself in the U.S., and how does Valero capture rent in the real world?
Great question. Okay, Lane knows that this is coming his way already. This is one of the questions we have been getting over the last day, and it is a very appropriate question. Did we introduce these guys?
I do not think we did, actually.
Okay. I am sorry. I should have done that. Okay, Lane Riggs, he is the Executive Vice President. He is on the executive committee. He runs refining and engineering for us. In his prior life right before this, he was responsible for crude and feedstock supply for about five years. Before that, he ran planning economics. When I showed you how we optimize within the system, his group was responsible for doing that. He has keen insights into this. The gentleman to his left is Ashley Smith, and Ashley is the Senior Vice President for Investor Relations and Strategic Planning. He is the guy who tries to keep us out of trouble at these events. I do not know how he is doing. You guys will have to tell us later. Anyway, Lane, do you want to go ahead and handle that question on crude?
I will give it a shot, and we have been asked that question quite a bit. I will sort of weave together I think a little narrative around this. I do not like to think too much about flat price. I know you guys are probably following the producers too. What I do follow closely is structure. What you saw in the crude markets about July of last year is you started seeing contango creep into and accelerate into the Brent paper market. You started seeing an indication of oversupply for the international crude market. At that time, you still had some backwardation in the WTI market. What does that tell me? That tells me I am long in the sort of the cargo market, and I am slightly short position in sort of the domestic North American supply situation.
You could hear people starting to consider taking out VLCC, storing crude, and people were trying to find a way to deal with the oversupply situation. You had OPEC, who was getting a lot of competition in the Far East, repoint their barrels back at the U.S., and you could sort of play out what was going to have to happen there because there was all this storage that is sitting there in Cushing, right? There was a place to store sort of back barrels back into the system. Ultimately you saw somewhere around December or January, the markets where they hit, which is along the coast, get somewhat at parity, and you could see that the WTI paper market started slipping into contango, started pushing barrels back. Where are we today?
You can sort of, again, use the slopes of these curves to determine the relative positions. The contango market is steeper in the WTI market, which means North America is long, longer than the foreign market, which there is contango in the foreign market. It is not nearly as steep. You can see now what is happening is we went from where there was parity, so you were clearing at all the Gulf Coast Refineries and all of our coastal refineries. Now you have the Brent/WTI out nominally at $10, and it is clearing at that number. What that is, is that the Jones Act vessel going from the Gulf Coast around to the East Coast, and then there is $3 or $4 straight back to Cushing.
You have an equilibrium situation, but you are trying to clear foreign cargoes into the East Coast, and it is still backing crude up into the storing barrels into the Gulf Coast and into Cushing. What is going to happen? The U.S. refining industry is in its sort of seasonal turnaround. We are at like 86% utilization according to DOE stats, 88% the week before. This will all continue probably for the next month or two. What I think will happen at some point in there is there will be a balance of things. You will see contango get steeper and steeper until it starts trying to push barrels back into the foreign crude market. We will see what the U.S. refining appetite is for the crude as it comes online. Balance that versus where the production in North America is.
The way you will see it manifest itself is you will look at the front end of the curve, the WTI curve will get steeper and steeper until what is full. The next question everybody asks is, "Well, what is full?" I don't think we know what full. We know what pitching full looks like. I don't think we know what PADD 3 full looks like yet. The most recent stats there actually set a record, but I don't think we know what full looks like until we see that as measured by the front end of the WTI curve.
The way it'll have to play out if the U.S. ends up being long is domestic crude will have to push out sort of the closest quality that's currently being imported, which is some Latin American lighter grades, and also just the AG grades that are coming in. We'll see how it works and how OPEC deals with whether they want to maintain market share or not. Beyond that, we'll just see how the world plays out.
Lane, just a quick follow-up to that. The very start of this year, WTI flipped to a premium to Brent at 96% U.S. utilization. How comfortable are you with the idea that the contango persists when U.S. refining gets back to peak utilization?
One, it'll be a lot of barrels that have gotten stored before that time, and it's all everybody's balances. I don't know how much additional production there is that's been since that time.
We also didn't have OPEC wasn't directing its barrels into the Gulf Coast. I think you have to see how the strategy around OPEC trying to maintain market share versus what is the growth of the North American production and see how all that plays out.
Thank you. Any more questions from the floor?
There is one right over here.
Yeah.
Could you provide a little color on where you expect product margins to go given, like Doug's question earlier, given the amount of capacity coming on, like Yanbu and Louisiana and in particular Brazil as well, and what you see in terms of the pace of refinery closures into Europe over the next couple of years?
You want me to start with you? I will take a stab at that one. Well, first of all, you need to look at where the crack spreads are now are largely this Brent/WTI wideness. A part of the U.S. Gulf Coast crack spread narrative is that. What does this glut of crude mean to U.S. refining, in particular to Valero, is that all this crude is having to compete for our crude distillation capacity. It does not really matter whether it is light, medium sour, heavy sour. It all has to compete for our crude capacity. As long as there is a glut of crude in the world or specifically North America, Valero benefits. In terms of capacity being added, so far we are not seeing, or at least we are the largest exporter of product in the United States.
Our trade guys don't see a lot of competition as of yet. If you think year-over-year, the United States was at fairly high utilization last year, all the economic signals were to run full. If you think out in the future, where is the surplus capacity to eat up the surplus crude or not? Is it Europe? You can use that as a proxy for how does their year-over-year utilization work out. When you think about the U.S., we're the most competitive refining industry in the world. We have the lowest cost gas, we have the most efficient labor force, and we have a North American sort of a resource advantage. Europe, I would say, acts as a floor.
As you see their economic signals get really pretty good, that means that the world, either the oversupply needs to get run off through their capacity into the product market, and as their margins fall, they can only fall so far, right? In other words, they aren't going to run and lose money, but they act as essentially a floor to what I would say the global refining business overall economics, which still gives U.S. refining industry rent in the space.
Question here.
Doug. Thanks, guys. You mentioned in one of your slides that you expect the lower prices to feed through to stronger demand. Can you maybe just give an indication of what you guys are seeing so far? Are you seeing any positive impact yet at this point?
Yeah, it's really hard to tell, right? But we all look at the same stats that are published. I guess yesterday we reported 9.3 MMbpd of gasoline demand. The week before it was like 9.6 MMbpd. Those figures get adjusted all the time. But it does look like there's a trend up, and in our system today because we're a wholesale marketer and we don't have the retail business, we can't look and say, "Joe, same store sales are up 3% or whatever." Ashley quoted some statistics yesterday, I think, that show that. Do you remember what they were on gas?
Trailing four weeks average was up 3%, well 3.4%.
For gasoline. Okay, so trailing four weeks was up 3%, and then diesel demand seems to be improving also, and that's really attributed to economic activity because obviously that's trucking volume that gets consumed and the airlines are flying more and you got more tonnage coming in. We've got a lot of information in the back of the deck on these economically driven consumers. So I think that would be as much quantitative data as we have. Qualitatively you would say, "Well, you got cheaper prices." The automakers are reporting truck sales are increasing again, and so on. Conceivably, we could end up with a situation, although consumer behavior changes slowly.
Lower price environment is likely going to stimulate increased demand. Although I can't quantify it for you, it looks like the other data points, the associated data points, would be headed the right direction for that to happen.
That's all, folks. I think we're out of time for Valero. Do you want to try and take one more?
She's-
Oh, go on then.
-very patient.
All right. Sorry.
Can you yell?
No.
Just to combine your crude outlook question, do you foresee a scenario here as refineries are coming out of maintenance of substantial product builds? Can we go out of the crude inventory problem to-
Shift the-
-product. Yeah.
-inventory builds. Do you want to talk to that?
Well, yeah. I would say we have the ability to export. We haven't reached our build. I'm going to use us as a proxy for the industry. We have not even really come close to the amount that we can export. It's sort of that comment I was making. You can use Europe as a proxy for that, right? Because the U.S. can export barrels, so we can move our length to the world if we in fact get long. What happens here is the world, you have to have European If there's a signal for European refining industry to run, if we get an overhang in the Atlantic basin, you'll see their margins go down, and the United States can still run, operate, produce product into their zero-margin environment, so.
Hey, real quick, just because you guys all have a view. We did a little deal last night, $75 , right?
Are we allowed to talk about that? Okay.
Well, there was no money, so it's all up and up. But $75 crude price, one year from today?
Last night.
Over, under. Who's under? Okay. Who's over? Okay. Looks like a similar distribution from the group last night. Okay, Lane, let's get the strategy set then.
Okay. All right. Thanks very much.