Challenges Ahead For US Refiners?

Challenges Ahead For US Refiners?

By Mark Finley

The US refining industry has had a great run this century.  But with the COVID-19 pandemic, 2020 was a tough year, resulting in the announcement of several domestic closures.  Could the pandemic be a glimpse of things to come for US refiners?

Between 2000 and 2019, US refining capacity and throughput increased substantially (+2.4 and +1.5 million b/d, respectively), even though domestic oil consumption fell slightly.  Indeed, over that period, the US moved from being one of the largest net importers of refined products in the world to being one of the largest net exporters.  

Moreover, the US experience stands in sharp contrast to refiners in other industrialized countries:  Capacity and throughput in the EU each fell by 1.6 million b/d over the same period.  Japanese refiners suffered even bigger declines in percentage terms.

So what's the secret?

How have US refiners competed so successfully?  Technical excellence, shale (with help from Canadian producers)“¦and an unintentional boost from policy.  

First is technical excellence. US refiners are highly sophisticated“¦and have the benefit of operating in the world's largest oil-consuming nation.  Simply put, they are able to produce lots of highly marketable gasoline and diesel fuel, with few of the less-valuable byproducts.  In technical terms, the US refinery fleet has much more upgrading capacity,