NADA has predicted that fuel prices will continue to moderate, and now we have one more piece of evidence for this position. The Wall Street Journal reported today (subscription required) that Delta Airlines has reached an agreement to buy the shuttered Phillips 66 refinery in Trainer, PA. This refinery was commonly held up as an example of how oil companies are shutting East Coast production facilities due to slim profit margins on gas and diesel.

Now that the facility will be put back into service, the volume of refined products potentially available to East Coast customers will increase by 185,000 barrels per day. While this number is a fraction of total US output, an increase in potential supply is a qualitative data point that will be considered by the individuals and entities who establish fuel price contracts.

So why did an airline purchase a refinery? Delta’s main goal is to increase control over their largest expense. In 2011, fuel represented 36% of the company’s operating costs. The airline plans to optimize the facility to produce jet fuel, and has also entered into agreements with Phillips 66 and British Petroleum to swap gasoline, diesel, and other refined products in exchange for jet fuel. So for about $150,000,000 – the price of one widebody jet - Delta will own production of 80% of its fuel needs. Looks like a smart gamble, and one with the potential to help keep a lid on fuel prices.