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 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
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Nov 25, 2022 - Refiners' Profits Soar
                                  • US refiners reaped hefty profits in the third quarter driven by lower input costs for natural gas and a decrease in the price of heavy, sour crude for which many refineries are optimized, The Wall Street Journal reports. Refiners’ latest earnings reports revealed that Marathon Petroleum’s gross profit for the quarter more than doubled year over year to $30.21 per barrel, while Valero Energy’s was $21.34 per barrel, also more than doubling, according to WSJ. In the five years leading up to 2019, the average gross profit for Valero’s third quarter was less than $11 per barrel. WSJ notes that while margins have narrowed since the records set in the second quarter, they are still multiples of pre-pandemic norms. The favorable operating environment had Marathon and Valero’s utilization rates running at 98% and 95% in the third quarter, respectively.
                                  • A potential shortage of diesel fuel has driven the price to a record premium over gasoline and crude oil. While the price of gasoline is up about 14% so far this year, the price for diesel has risen by about 50%, to $5.35 a gallon, according to energy price data from AAA/OPIS. The gains widened the gap between the two fuels to an all-time high of $1.61, versus 23 cents a year ago. Dwindling stocks, the war in Ukraine, severe weather, and other disruptions to the global energy markets are behind the widening gap, The Wall Street Journal reported in November 2022. Wholesale diesel, delivered into New York harbor, traded at a record premium to crude oil in October, according to the Energy Information Administration, which also reported the country had only 25 days of diesel in reserve, the lowest since 2008.
                                  • The Biden administration in October 2022 announced plans to release 15 million barrels of oil or more from the US Strategic Petroleum Reserve (SPR) following a cut in production announced by the OPEC+ energy cartel. As of November 2022, releases from the SPR had depleted the nation’s emergency stockpile of crude oil to about 390 million barrels, the lowest level since the 1980s. The current release program – begun in May by the Biden administration to ease soaring gas prices – will leave the SPR at its lowest level since 1983: at about 342 million barrels, or less than half of the system’s 714 million bbl capacity, according to RBN Energy LLC analyst Jason Lindquist. Lower volumes in the SPR could make the market more volatile if supply-related issues arise late in 2022 or in 2023.
                                  • Residential exposure to pollutants from petroleum refining could be related to strokes in the southern US, a study published in September 2022 in Environmental Research Letters found. While emission of multiple pollutants from petroleum production and refining (PPR) had previously been linked to diseases that lead to strokes, the relationship between residential exposure to PPR and their link to causing strokes had not previously been well studied, reported. Using CDC data from seven southern states for areas within a 2.5 km or 5 km radius of petrol refineries, researchers from Yale, Brown, and Seoul National universities found that living near petrol refineries accounted for 5.6% of strokes in adults. In Mississippi, the prevalence of stroke was 11.7%, while one census track in Texas showed the highest prevalence of stroke potentially explained by proximity to PPR of 25.3%.
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