More than 15 years into the Shale Era, the U.S. refining sector’s response to burgeoning production of light, sweet crude oil continues. Earlier this month, Chevron completed the long-planned, $400 million renovation and expansion of the century-old refinery in Pasadena, TX, which the company acquired from Petrobras in 2019. In today’s RBN blog, we discuss the refinery’s extensive history, why Chevron bought the facility five years ago, and how the just-finished project will enable the integrated oil and gas giant to make fuller use of its Permian oil bounty.
Posts from Robert Auers
Monday, 11/11/2024
There’s been a lot of speculation about whether the pace of electric vehicle (EV) adoption has slowed, with JD Power now expecting EVs to make up 9% of U.S. new-car sales in 2024, down from its earlier estimate of 12.4% but still up from 7% in 2023. The group remains bullish on EVs in the long term, expecting market share to reach 36% by 2030 and 58% by 2035. The forecast from RBN’s Refined Fuels Analytics (RFA) group forecast has been — and continues to be — more conservative than most but still anticipates EVs will reach 50% of U.S. new-car sales by the early 2040s. In today’s RBN blog, we’ll look at what drives these forecasts and the anticipated impacts on gasoline demand.
Friday, 11/01/2024
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.
Friday, 10/11/2024
There’s been a lot of speculation about whether the pace of electric vehicle (EV) adoption has slowed, with JD Power now expecting EVs to make up 9% of U.S. new-car sales in 2024, down from its earlier estimate of 12.4% but still up from 7% in 2023. The group remains bullish on EVs in the long term, expecting market share to reach 36% by 2030 and 58% by 2035. The forecast from RBN’s Refined Fuels Analytics (RFA) group forecast has been — and continues to be — more conservative than most but still anticipates EVs will reach 50% of U.S. new-car sales by the early 2040s. In today’s RBN blog, we’ll look at what drives these forecasts and the anticipated impacts on gasoline demand.
Thursday, 10/03/2024
It now seems likely that Elliott Investment Management’s Amber Energy will acquire CITGO Petroleum for $7.3 billion in mid-2025, thereby ending a yearslong legal drama about the fate of CITGO’s three large U.S. refineries and related pipelines and terminal assets. So what exactly is Amber buying and how will the refineries in question fare in the increasingly competitive global market for refined fuels? In today’s RBN blog, we’ll summarize the long legal battle that led to Amber’s selection by a federal court’s “special master” as the preferred buyer, examine the assets to be acquired, and assess what’s ahead for CITGO’s refineries, which have a combined capacity of more than 800 Mb/d.
Tuesday, 4/25/2023
The world is full of paradoxes and apparent contradictions, like the phrase “this page intentionally left blank” on an otherwise empty page in a government report, and the energy sector is no different. The U.S. is the world’s largest exporter of the “Big 3” petroleum products — gasoline, diesel/gasoil and jet fuel/kerosene — but it still imports significant volumes of those very same products. That paradox, which is not unlike the U.S.’s need to both export and import various grades of crude oil, is tied to a mismatch between where the product is produced and where it is consumed. In today’s RBN blog, we look at the factors that contribute to that mismatch and what it means for U.S. “Big 3” production and exports going forward.
Monday, 3/20/2023
At first glance, the Environmental Protection Agency’s (EPA) proposal to facilitate increased sales of E15 — an 85/15 blend of gasoline blendstock and ethanol — by putting it on the same summertime regulatory footing as commonly available E10 in eight Midwest/Great Plains states might seem like a boon to corn farmers and ethanol producers. But as we discuss in today’s RBN blog, there are a number of economic, practical and even psychological barriers to broadened public access to — and use of — E15 that go well beyond the specific regulatory issue the EPA proposal addresses. As a result, as we see it, EPA’s plan is unlikely to boost E15 demand in any meaningful way, at least for now.
Tuesday, 3/07/2023
U.S. production of renewable diesel (RD) is rising fast and production of sustainable aviation fuel (SAF) will soon follow suit, driven largely by federal and state incentives. But U.S. demand for both RD and SAF is growing at a more measured pace, mostly because they are throttled by a number of other governmental policies, including the level of blending mandates set by the Environmental Protection Agency (EPA). As we see it, the net effect of this disconnect between domestic supply and demand will be the U.S. becoming a net exporter of RD this year and a net exporter of SAF in 2025 — but only after a spike in SAF imports in 2023-24. Yes, it’s complicated, but with public-sector policies impacting both sides of the supply/demand scale, did you really expect it wouldn’t be? In today’s RBN blog, we look at two more energy products the U.S. will be exporting.
Sunday, 8/14/2022
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.
Monday, 7/18/2022
As the world economy tries to dust itself off after COVID, increased demand for transportation fuels coupled with tight supplies has become a pain. The shortage escalated to crisis levels this spring and summer when, in response to Russia’s invasion of Ukraine, sanctions eliminated Russian exports of crude oil and intermediate feedstocks to the U.S. and severely reduced flows to Europe. While Russia has been able to find some alternate markets, its overall product exports are down significantly. Adding to these product-supply reductions are policy decisions by Putin’s allies in China to reduce their product exports to a trickle. Chinese exports had been an important part of regional supply in recent years, but authorities there have decided to decrease the number and size of export quotas issued, leaving many refineries in China operating at rates well below their capabilities. In today’s RBN blog, we take a closer look at how developments in Russia and China have played a major role in the current global shortage of refined products.
Tuesday, 7/05/2022
Way back in 2019, just about everyone in the refining world was talking about IMO 2020, the International Maritime Organization’s soon-to-be-implemented rule requiring much lower sulfur emissions from most ocean-going ships. A lot of forecasters were anticipating that major market dislocations would result — things like $50/bbl-plus diesel crack spreads, oversupply of high-sulfur fuel oil, and ultra-wide differentials between light and heavy crude oils. They did, but only briefly, in the last few months of 2019. The implementation of IMO 2020 turned out to be pretty much a non-event, and for much of 2020 and 2021, people didn’t think much about the new bunker fuel rule. Lately, things have been changing, as we discuss in today’s RBN blog.
Sunday, 6/26/2022
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.
