Petroleum Refineries

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 162 petroleum refineries in the US transform crude petroleum into usable products. Gasoline accounts for nearly half of industry sales. Other products include light fuel oils, heavy fuel oils, jet fuel, and kerosene. Firms typically operate multiple refineries in areas strategically located near sources of supply, distribution centers, or key customers.

Push for Renewable Fuels

Concern over the environment and dependence on fossil fuels has led to a government and public push for renewable and alternative fuels.

Capital-Intensive Operations

The petroleum refinery business is extremely capital-intensive and requires significant investment in plants, property, and equipment.

Industry size & Structure

The average petroleum refinery employs about 382 workers and generates about $3.5 billion annually.

    • The petroleum refinery industry consists of about 162 establishments that employ about 62,000 workers and generate about $560 billion annually.
    • The industry is highly concentrated; the top 20 companies account for about 92% of industry revenue.
    • Large integrated oil companies, which include Exxon Mobil, Chevron, and Valero, engage in exploration, production, supply, transportation, marketing, and retailing. Firms with petroleum refinery operations include MPLX LP, HF Sinclair Corp. (formerly HollyFrontier), and Alon USA Energy (Delek).
    • A total of 129 operable petroleum refineries exist in the United States, according to the US Energy Information Administration (EIA).
                                  Industry Forecast
                                  Petroleum Refineries Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  May 27, 2024 - Producer Prices Sink
                                  • According to the latest US Bureau of Labor Statistics data, producer prices for petroleum refineries fell 5.4% in March compared to a year ago after sinking 17.5% in the previous annual comparison. Producer prices for petroleum refineries began rising sharply at the onset of the pandemic, peaked in mid-2022, and have since largely trended downward. While industry employment grew 2.6% in March year over year, employment by petroleum refineries has been declining since mid-2019 due to layoffs caused by refinery closures and capacity cuts accelerated by the pandemic.
                                  • The National Oceanic and Atmospheric Administration (NOAA) is predicting an above-normal Atlantic hurricane season (June 1 to November 30) that could see between 17 to 25 named tropical cyclones, the most NOAA has ever forecast in May for the Atlantic Ocean. NOAA forecasters believe eight to 13 of the named storms could become hurricanes. La Nina and warmer-than-average ocean temperatures are the major drivers of what’s expected to be elevated tropical activity, according to NOAA. The agency predicts an 85% chance of an above-normal season, a 10% chance of a near-normal season, and a 5% chance of a below-normal season. Even the threat of a major storm can disrupt petroleum refinery operations because refineries usually evacuate non-essential personnel and start to shut down or reduce operations as a precaution.
                                  • US retail gasoline prices will average about $3.70 per gallon from April through September, similar to prices during the same period last year, and average $3.50 per gallon for the year, according to the US Energy Information Administration’s May 2024 Short-Term Energy Outlook (STEO). Refinery operations are a source of uncertainty for gasoline markets this summer. The EIA forecasts that US commercial crude oil inventories (inventories that exclude crude oil in the Strategic Petroleum Reserve) will fall near the bottom of the five-year (2019–23) range in July and August 2024 and then increase to near the 2020–24 average during the second half of 2025.
                                  • Crude oil refining is one of eight industrial sectors lagging on emissions cuts, according to new reports from the US Department of Energy. To date, the eight industries have done little to move toward the Biden administration’s goals of halving US emissions by 2030 and reaching net zero by 2050, according to DOE analysts. In 2022, the US produced 20% of global refined oil and was the world’s top producer of refined oil products (gasoline, diesel, jet fuel, biofuels) on a volume basis. Production emissions from refining accounted for about 2% of US carbon dioxide equivalent emissions in 2021. Decarbonizing the transportation sector could lead to a meaningful reduction in demand for refined oil products. But without widespread implementation of decarbonization levers, refining will likely continue to be a major contributor to US emissions. Refining emissions could grow by about 5–10% by 2050 in a business-as-usual scenario, per the report.
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