Already Gone, Part 2 - Refinery Shutdowns Around the World

As the price of gasoline continues its seemingly never-ending upward path in the U.S. (not withstanding a bit of a pause in the past week), the cause (or blame, if you prefer) continues to shift. Of course, the Biden administration has heavily promoted the phrase “Putin’s price hike,” and the Russian president can certainly claim some of the blame. His invasion of Ukraine and the subsequent sanctions on the world’s second-largest exporter of refined products (after the U.S.) have led to the loss of several hundred thousand barrels per day of product supply. However, prices for refined products were already rising before his late February invasion due to a variety of other factors, both on the supply and demand sides of the equation. Perhaps the most important factor has been the loss of significant U.S. refining capacity over the last few years, which is limiting the ability of refiners to respond to the strong demand recovery and loss of supply. In its highly publicized June 15 letter to U.S. oil executives, the administration acknowledged this as it demanded refiners reactivate lost capacity and increase production. In today’s RBN blog, we summarize the shutdowns which have taken place in the U.S. and discuss the reasons behind those closures.

The high cost of gasoline and diesel and their impact on inflation and the global economy has been a major market development this year, with the blame typically being cast on politicians, oil producers and policies intended to limit development of traditional energy resources and encourage decarbonization — and sometimes all of the above. Prices have retreated in recent weeks amid lower consumer demand and worries about the state of the global economy, but long-term concerns about global refining capacity and the possibility of another price spike remain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on the state of global refining.

The cost of gasoline has garnered a lot of headlines since the start of 2022, with the blame for elevated prices falling on seemingly everything and everyone, from the Biden administration’s policies on oil exploration to Russia’s invasion of Ukraine, as well as decisions by major U.S. producers and OPEC not to swiftly boost oil production. Another can't-be-ignored culprit is the loss of significant U.S. refining capacity over the last few years, which has limited the ability of refiners to respond to the strong, post-COVID demand recovery by ramping up production. By and large, the refineries still operating have been running flat out. In today’s RBN blog, we look at the state of global refining, where new capacity is likely to be built, and the headwinds to future investment.