Tuesday, July 15, 2014

Does America Need More Oil Refineries?


The U.S. has far fewer refineries that it used to, but is that a bad thing?

Does America have enough oil refineries? Enough refining capacity? The answers often depend not only on whom you ask, but when.

If it’s springtime, when refineries are wrestling with annual maintenance checks and balances and the often bumpy transition from "winter-blend" to "summer-blend," many consumers and perhaps some oil industry observers too may be inclined to say that a few more refineries might ease bottlenecks and price spikes, particularly in some regions where fuel supply options are nonexistent or extremely limited. (Sure, build those refineries almost anywhere, they’ll say, except the Gulf Coast, which already has nearly 50 percent of the nation’s refining capacity.)

On the other hand, if you ask these questions in October or November, when most states see substantial declines in gas prices from mid-summer levels, you might hear that’s not needed now; it’s a problem that’s under control.

The Energy Information Administration last week released its "Refinery Capacity Report," which surveys refinery ownership and capacity at the start of each year. Most notable is the fact that U.S. refineries continue to increase capacity, even as domestic consumption of gasoline is projected to show consistent decline. As of January 1, 2014, there were 139 operating refineries and three others currently idle, with a total capacity of 17.9 million barrels per day.

In 2000, the U.S. had 159 refineries operating with a capacity at 16 million barrels per day. And in 1990, believe it or not, there were 205 refineries in operation, at a capacity of 15.1 million barrels per day. It's hard to believe, but apparently the 139 refineries the U.S. now has are easily meeting current demand for domestic needs, as well as exports of petroleum products other than crude oil and gasoline.

 The current refining leaders ranking first, second and third are Valero Energy, ExxonMobil and Marathon Petroleum. Philips 66 and Motiva rank fourth and fifth, and combined, according to Downstreamtoday.com, these five companies own 45 percent of U.S. refining capacity.
Some are looking to increase their production of distillates such as ultra low-sulfur diesel and decrease gasoline, reflecting emerging trends in domestic and international demand. While domestic gasoline demand appears tame, if not flat, keep an eye on the millennials (those born between the early 1980s and early 2000s). Their apparent indifference to automobiles is more a lifestyle fit than a deeply-held position, and for that reason it’s likely to change, perhaps quickly, once they find spouses and children arrive.

No comments:

Post a Comment