Mixed Signals – While Many U.S. Refiners Face a Gloomy Outlook, Things Look Brighter in PADD 3

The U.S. refining industry has been on a real rollercoaster ride in recent years, as the disastrous COVID shutdown period of 2020 — which led to the closure of many refineries — was closely followed by the “Platinum Age” margins experienced when demand recovered in 2021 and 2022. Since then, the trend has been mostly downhill, as demand growth has slowed and new refining capacity has come online from projects that were delayed during the pandemic. But while many of these trends were felt across the U.S. (and even globally), there have been major regional differences in refiner market performance, a dynamic we expect to continue as we head toward an uncertain future, made even more so by the recent events in Venezuela. In today’s RBN blog, we take a region-by-region look at the future of the U.S. refining industry and explain why reductions in refining capacity are expected in some areas while others may be in a position to thrive.

Before we get into the regional outlook, let’s take the 50,000-foot view of where things stand today at the global level. Since 2010, global refinery net capacity has increased by about 700 Mb/d per year, with significant year-to-year volatility (see Figure 1 below). A decades-high level of net refining capacity additions of 2.1 MMb/d took place in 2023, the largest annual increase since 1977, followed by a still-significant 1.15 MMb/d of net additions in 2024. While our preliminary estimates show an addition of more than 1 MMb/d in 2025, they were negated by an even-larger level of refinery closures, resulting in a net capacity decrease of about 200 Mb/d (which excludes all the temporary loss of operating capacity in Russia). Most of the capacity growth in recent years has come from projects that suffered pandemic-related pauses or slowdowns, with large projects in the Middle East, Asia Pacific and Africa (primarily the Dangote refinery in Nigeria) leading the way. In our upcoming Future of Fuels report we will include a forecast for net capacity changes expected over the next five years (through 2030) based on our analysis of which new projects will be completed in that timeframe and planned refinery closures.