Reports related to this article:
Project(s): View 3 related projects in PECWeb
Plant(s): View 3 related plants in PECWeb
Released June 13, 2022 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--Propelled by strong margins, U.S. refineries are expected to run at "relatively high" utilization rates this summer, according to the U.S. Energy Information Administration's (EIA) June Short-Term Energy Outlook.
Wholesale prices for petroleum like diesel and gasoline, which have increased more than the price of the crude oil used to make them, will drive the higher rates, according to the EIA. Historically high crack spreads for both diesel and gasoline increased in the first several months of 2022, it noted.
"In response to these high prices, we expect that refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain," according to the EIA's Friday Today in Energy report. "We expect refinery utilization to average 96% in June, 94% in July, and 96% in August."
The EIA attributed the high prices and crack spreads to low product inventories both in the U.S. and globally; increases in fuel demand to almost pre-COVID 19 pandemic levels; relatively low refinery production, when compared with pre-pandemic levels and reduced petroleum product exports from Russia.
The EIA estimates U.S. refinery inputs will average 16.7 million barrels per day (BBL/d) during the second and third quarters of 2022.
However, "this average is lower than the 2019 refinery inputs average of 17.3 million (BBL/d) despite high utilization rates because of reductions in refinery capacity since early 2020," the EIA continued.
The EIA said it expects wholesale prices for gasoline and diesel to begin decreasing in the third quarter of 2022, as refinery production increases. However, prices will remain well above previous years through the summer, it added.
In a June 6 blog, the refining industry trade group American Fuel & Petrochemical Manufacturers (AFPM) indicated there's no easy fix for increasing the amount of petroleum fuels above current capacity levels.
"After more than two decades of growth in which the United States became the world's largest refiner by volume, our industry has contracted," the AFPM said. "We've lost 1.1 million barrels of daily refining capacity over the course of the global pandemic with at least seven facilities shuttering, closing units or beginning the transition away from petroleum processing."
At the start of 2020, the U.S. had 135 operable petroleum refineries and total refining capacity of 19 million BBL/d, the AFPM said.
"Today, we have 128 operable refineries with total crude distillation capacity of 17.9 million barrels per day," it continued. During this same period, global capacity dropped by 3.3. million BBL/d, with the U.S. making up about a third of that amount.
The closures haven't stopped in the U.S. LyondellBasell Industries NV (NYSE:LYB) (Rotterdam, Netherlands) plans to shut its 268,000-BBL/d Houston Refinery in Texas, one of the largest in the U.S., in an effort to exit its refining business, by the end of next year.
AFPM maintained the sharp drop in fuel demand amid the COVID-19 pandemic wasn't the only reason for the loss in fuel-making capacity.
"Political and financial pressure to move away from petroleum-derived fuels, costs associated with federal and state regulatory compliance and facilities' singular economic performance all inform these decisions" to shut down refineries, the trade group said. It added that the drop in fuel demand over the course of the pandemic "certainly sped up the timeframe for refining contractions, closures and transitions, but many of these moves were already planned or underway..."
The AFPM said there's no way to reverse refinery closures and quickly restart facilities.
"More than half of the refining capacity lost in the United States over the past couple years is in the process of being transitioned to full-time renewable fuel production or it's being dismantled," it said.
Also, reopening a refinery "is a major effort. It would require significant lead time to inspect machinery and attain necessary operating permits. Staff would need to be reassembled and/or recruited and trained. And the facilities themselves would need to be reintegrated with supply chains. A hypothetical restart is not a quick-turn project, and the investment cannot be based on short-term data."
To be sure, a lot of the fuel produced in the U.S. is exported to other countries. BNN Bloomberg, citing data from oil analytics firm Vortexa (London, England), reported that as much as 2.09 million BBL/d of gasoline, diesel and jet fuel was shipped out from the U.S. Gulf in April, with the bulk of those exports going to Latin American countries.
AFPM did note that capacity expansions at existing operational refineries are underway, mainly aimed at increasing throughput of U.S. light, sweet crude oil.
Industrial Info is tracking a number of U.S. refinery expansions, including Exxon Mobil Corporation's (NYSE:XOM) (Irving, Texas) expansion of its refinery in Beaumont, Texas, as part of its Beaumont Light Atmospheric Distillation Expansion (BLADE) initiative. The project will increase the capacity of the 344,000-BBL/d refiner by installing a third crude unit with the ability to process 250,000 BBL/d. Completion is planned for early 2023. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Project Database can click here for a detailed project report.
Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) is working to increase the capacity of its 437,000-BBL/d Galveston Bay Complex in Texas by 40,000 BBL/d to improve gas oil and distillate yields. The expansion is part of Marathon's South Texas Asset Repositioning (STAR) project). Completion is planned for early 2023. Subscribers can learn more by clicking here.
Phillips 66 Company (NYSE:PSX) (Houston, Texas) is working to expand the capacity of its existing 247,000-BBL/d Sweeny Refinery in Old Ocean, Texas, through the construction of a 150,000-BBL/d natural gas liquids (NGL) fractionation unit addition. Completion is planned for July. Subscribers can click here for more information.
Subscribers can click here for all three project reports featured in this article and here for the related plant profiles.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
Wholesale prices for petroleum like diesel and gasoline, which have increased more than the price of the crude oil used to make them, will drive the higher rates, according to the EIA. Historically high crack spreads for both diesel and gasoline increased in the first several months of 2022, it noted.
"In response to these high prices, we expect that refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain," according to the EIA's Friday Today in Energy report. "We expect refinery utilization to average 96% in June, 94% in July, and 96% in August."
The EIA attributed the high prices and crack spreads to low product inventories both in the U.S. and globally; increases in fuel demand to almost pre-COVID 19 pandemic levels; relatively low refinery production, when compared with pre-pandemic levels and reduced petroleum product exports from Russia.
The EIA estimates U.S. refinery inputs will average 16.7 million barrels per day (BBL/d) during the second and third quarters of 2022.
However, "this average is lower than the 2019 refinery inputs average of 17.3 million (BBL/d) despite high utilization rates because of reductions in refinery capacity since early 2020," the EIA continued.
The EIA said it expects wholesale prices for gasoline and diesel to begin decreasing in the third quarter of 2022, as refinery production increases. However, prices will remain well above previous years through the summer, it added.
In a June 6 blog, the refining industry trade group American Fuel & Petrochemical Manufacturers (AFPM) indicated there's no easy fix for increasing the amount of petroleum fuels above current capacity levels.
"After more than two decades of growth in which the United States became the world's largest refiner by volume, our industry has contracted," the AFPM said. "We've lost 1.1 million barrels of daily refining capacity over the course of the global pandemic with at least seven facilities shuttering, closing units or beginning the transition away from petroleum processing."
At the start of 2020, the U.S. had 135 operable petroleum refineries and total refining capacity of 19 million BBL/d, the AFPM said.
"Today, we have 128 operable refineries with total crude distillation capacity of 17.9 million barrels per day," it continued. During this same period, global capacity dropped by 3.3. million BBL/d, with the U.S. making up about a third of that amount.
The closures haven't stopped in the U.S. LyondellBasell Industries NV (NYSE:LYB) (Rotterdam, Netherlands) plans to shut its 268,000-BBL/d Houston Refinery in Texas, one of the largest in the U.S., in an effort to exit its refining business, by the end of next year.
AFPM maintained the sharp drop in fuel demand amid the COVID-19 pandemic wasn't the only reason for the loss in fuel-making capacity.
"Political and financial pressure to move away from petroleum-derived fuels, costs associated with federal and state regulatory compliance and facilities' singular economic performance all inform these decisions" to shut down refineries, the trade group said. It added that the drop in fuel demand over the course of the pandemic "certainly sped up the timeframe for refining contractions, closures and transitions, but many of these moves were already planned or underway..."
The AFPM said there's no way to reverse refinery closures and quickly restart facilities.
"More than half of the refining capacity lost in the United States over the past couple years is in the process of being transitioned to full-time renewable fuel production or it's being dismantled," it said.
Also, reopening a refinery "is a major effort. It would require significant lead time to inspect machinery and attain necessary operating permits. Staff would need to be reassembled and/or recruited and trained. And the facilities themselves would need to be reintegrated with supply chains. A hypothetical restart is not a quick-turn project, and the investment cannot be based on short-term data."
To be sure, a lot of the fuel produced in the U.S. is exported to other countries. BNN Bloomberg, citing data from oil analytics firm Vortexa (London, England), reported that as much as 2.09 million BBL/d of gasoline, diesel and jet fuel was shipped out from the U.S. Gulf in April, with the bulk of those exports going to Latin American countries.
AFPM did note that capacity expansions at existing operational refineries are underway, mainly aimed at increasing throughput of U.S. light, sweet crude oil.
Industrial Info is tracking a number of U.S. refinery expansions, including Exxon Mobil Corporation's (NYSE:XOM) (Irving, Texas) expansion of its refinery in Beaumont, Texas, as part of its Beaumont Light Atmospheric Distillation Expansion (BLADE) initiative. The project will increase the capacity of the 344,000-BBL/d refiner by installing a third crude unit with the ability to process 250,000 BBL/d. Completion is planned for early 2023. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Project Database can click here for a detailed project report.
Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) is working to increase the capacity of its 437,000-BBL/d Galveston Bay Complex in Texas by 40,000 BBL/d to improve gas oil and distillate yields. The expansion is part of Marathon's South Texas Asset Repositioning (STAR) project). Completion is planned for early 2023. Subscribers can learn more by clicking here.
Phillips 66 Company (NYSE:PSX) (Houston, Texas) is working to expand the capacity of its existing 247,000-BBL/d Sweeny Refinery in Old Ocean, Texas, through the construction of a 150,000-BBL/d natural gas liquids (NGL) fractionation unit addition. Completion is planned for July. Subscribers can click here for more information.
Subscribers can click here for all three project reports featured in this article and here for the related plant profiles.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
