Petroleum Refineries NAICS 324110

Mar 27, 2025 - Shrinking Margins

• Refinery margins for petroleum refiners are shrinking – due in part to reduced demand – indicating reduced profitability from refining crude oil and the sale of petroleum products, according to the US Energy Information Administration. Producer prices for petroleum refineries, which measures prices refiners receive for their output, fell 8.1% in December compared to a year ago after dropping 13.7% in the previous December-versus-December annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the refineries shrank 1.6% year over year in January, according to the BLS.
• Inventories of the three largest transportation fuels in the US will fall to their lowest levels in 2026 since 2000, according to the Energy Information Administration’s February Short-Term Energy Outlook (STEO). The low inventories are due to two refinery closures, which will reduce production of refined petroleum products, and rising consumption. The EIA expects inventories for motor gasoline, distillate fuel oil, and jet fuel to decline through 2026 and is forecasting inventories for these fuels to end next year at 375 million barrels, the lowest since 2000 when they ended the year at 358 million barrels. As a result, EIA expects wholesale refinery margins for the three fuels will increase. However, the wider margins will be partially offset by falling crude oil prices, leading to relatively smaller increases in retail fuel prices or even a decline in retail gasoline prices.

• President Trump’s threat to impose a 25% tariff on crude oil from Canada would be particularly painful for US refiners as approximately 55% of all US crude imports flow from Canada, OilPrice.com reports. US refiners, especially those in the Midwest, take nearly all of Canada’s crude oil exports, and all but one of its export pipelines go to the US. Refineries in Michigan, Wisconsin, Indiana, and Ohio process almost 70% of the Canadian crude imports, according to Canada’s Cenovus Energy, which owns refineries in Ohio and Wisconsin. “A 25% tariff on Canadian crude could increase gas prices at the pump by up to 30 cents or more per gallon,” Cenovus said. On his first day in office, Trump said he aims to place 25% tariffs on imports from Canada and Mexico on February 1. Tariffs on Canadian crude, if levied, could lower downstream profitability for US refineries.
• A California law signed by the governor in October imposes new mandates on refineries in the state, The Wall Street Journal reports. The statute, ABX2-1 – ostensibly designed to prevent supply shortages that can result in price spikes at the gas pump – gives regulators at the California Energy Commission (“CEC”) greater control over oil refineries operating in the state. Specifically, it empowers the CEC to set minimum inventory standards for oil refineries, as well as restrict the conditions under which refineries can undergo maintenance that would reduce their output temporarily. High operating costs have already caused seven California refineries to cease production over the last decade, according to WSJ. Critics say the new law imposes intolerably high operating costs on refineries. Moreover, the statute imposes significant penalties for noncompliance — between $100,000 and $1,000,000 per day for each day in violation.