refinery closures

Strong demand for refined products (especially jet fuel) in Arizona and refinery closures in Southern California have spurred the development of a new refined products pipeline from West Texas to the Phoenix area. ONEOK, whose acquisition of Magellan Midstream Partners made it a player in refined products, has announced an open season for the proposed Sun Belt Connector pipeline, which would expand PADD 2 and PADD 3 refiners’ access to premium markets out West. In today’s RBN blog, we discuss ONEOK’s plan and how it could impact refined products markets. 

Weak refining margins, rising regulatory compliance costs, softening demand for gasoline and the push for lower-carbon alternatives like batteries and renewable diesel have each contributed to a steady decline in California’s refining capacity the past few years. Now, Phillips 66’s plan to idle its 139-Mb/d Los Angeles Refinery in Q4 2025 will leave the Golden State with only seven conventional refineries producing gasoline, diesel and jet fuel — a couple of dozen fewer than it had 40 years ago. In today’s RBN blog, we’ll put P66’s recent announcement in context and discuss the likelihood of additional refinery closures. 

It could be argued that no sector in the energy industry has seen more uncertainty the past three years than refining. In rapid succession, it experienced a historic collapse in demand, a shaky recovery, a run-up in crude oil and other feedstock prices, the disruption in Russian supply, and the wrath of the public and politicians alike when gasoline and diesel prices rocketed higher earlier this year. Prices at the pump may have sagged in recent months, but don’t think for a second that refining has reverted to anything resembling stability and normalcy — refiners still face a host of challenges and unknowns. For starters, what’s ahead for crack spreads, which have been spiking up and down lately? How quickly will electric vehicles (EVs) undermine demand for traditional motor fuels? And what about renewable diesel? New environmental regulations? More refinery closures? In today’s RBN blog, we look at the long list of challenges domestic and international refiners will face through the rest of the 2020s.

We often tend to focus on the U.S. refining picture, but, just like crude oil, refined products trade globally, and international closures ultimately have the same effect as domestic ones on the worldwide products market. Recent international closures have been distributed throughout the world — concentrated in developed countries, including several in Europe, as well as Japan, Singapore, Australia and New Zealand, but also in some developing economies like South Africa and Sri Lanka. Most of these capacity reductions were driven by the same forces as in the U.S., namely, poor economics as a result of the pandemic-lockdown-driven demand plunge in 2020 and 2021, as well as expectations that margins would take a long time to recover post-COVID. Of course, worries that the energy transition and policies to that end would suppress demand in the long-term also played a key role, as did some fundamental competitiveness issues at individual facilities. In today’s RBN blog, we take a closer look at the more than 2 MMb/d of international capacity closures since 2019.

It has been nearly a year since the novel coronavirus was first detected in China — that’s right, a year. In that time, we have seen significant parts of the world come to a near standstill, become all too familiar with video conferencing, and canceled family vacations and business travel. The fact that many of us have been stuck at home has wreaked havoc on the U.S. refining industry, with plummeting utilizations and some facilities shutting down, either temporarily or permanently. And, depending on how the U.S. transportation sector rebounds from the pandemic in 2021 and beyond, more refinery closures may be on the horizon. Today, we look at the U.S. facilities that are shutting down and tally up the capacity lost so far.