Petroleum Refineries
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 171 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 have 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 350 workers and generates about $4 billion annually.
- The petroleum refinery industry consists of about 171 establishments that employ about 60,400 workers and generate over $547 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 (Andeavor), HollyFrontier, and Alon Energy (Delek).
- A total of 135 operable petroleum refineries exist in the United States, according to the US Energy Information Administration (EIA).
Industry Forecast
Petroleum Refineries Industry Growth
Coronavirus Update
Apr 22, 2022 - EPA Denies Small Refinery Exemptions
- The Environmental Protection Agency in April 2022 denied petitions from 36 small refineries seeking exemption from their Renewable Fuel Standard (RFS) obligations. The refineries were seeking waivers to biofuel blending mandates, arguing the cost of blending biofuels like ethanol into their fuel could put them out of business. Under the RFS, oil refineries must blend billions of gallons of corn-based ethanol and other fuels into the fuel pool or purchase credits to remain in compliance.
- Big oil companies are investing to make carbon capture and storage (CCS) a key technology to mitigate the effects of global warming. An important emissions reduction technology, CCS involves capturing carbon dioxide from fuel combustion or industrial processes, transporting it via ship or pipeline, and storing it underground in geological formation or as a resource to create products. Exxon Mobil, which processes over 1.9 million barrels of crude oil per day in the US, in April 2022 estimated the market for capturing and storing carbon dioxide to reach $4 trillion by 2050. Previously, Occidental Petroleum estimated CCS could become a $3.5 trillion global industry.
- US petroleum refineries and pipelines are closely watching their systems for signs of cyberattacks. The industry has been the target of Russian cyberattacks in the past and concern is high that hackers will strike in retaliation for sanctions, bans, financial institution shutdowns, corporate pull-outs, and military and humanitarian aid to Ukraine in its defense against Russian attacks. Refineries and pipelines are high value targets for hackers. In spring 2021, Colonial Pipeline paid $4.4 million in ransom to hackers affiliated with a Russian cybercrime organization.
- Concerns over the global oil supply have eased somewhat. The per-barrel cost of crude oil fell from about $115 in the US and $112 in Europe on March 23, 2022 to $94 in the US and $98 in Europe on April 11, 2022. However, prices remain well above levels reported before Russia’s invasion of Ukraine and the subsequent sanction and bans placed on Russian oil.
- Refining capacity is likely to outpace demand by 1-2 million barrels a day in the next two to three years, according to Citigroup analyst Prashant Rao. More refineries are being built around the world at a rate that is outpacing demand for oil products, Rao said. The pandemic may have slowed oil demand, but it didn’t slow refinery projects enough. So even as refiners work to get back to their prior operating levels, new competitors are getting close to opening. Refiner profitability is likely to “take a step down from where it was before the pandemic” despite the current increase in fuel prices, Rao says.
- Some US oil refineries are becoming stranded assets due to declining demand for some products made from crude oil, according to industry consulting firm RBN Energy. Oil producer Shell has announced plans to sell eight of its 14 refineries by 2025. The company recently announced plans to convert its Convent refinery in Louisiana to alternative fuel after failing to find a buyer. While it’s unclear when the conversion will take place, Shell will continue to pay property taxes to the state on the idle facility at a rate of $10 million in 2022 and 4.5 million in 2023.
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