Why are U.S. refineries shutting down? (2023)

Why are American refineries shutting down?

Most of the refineries were closed due to demand loss as a result of the Covid-19 pandemic.

For conventional biofuels, which includes ethanol, EPA set volumes at 15 billion gallons for 2022. New refineries are unlikely to be built in the United States due to daunting environmental standards and policies that the Biden administration has been implementing to reduce petroleum product consumption in the future.

Underpinning the decisions not to reopen refineries is the fact that the U.S. is undergoing an energy transition from fossil fuels to renewables. The Biden administration envisions a future where the world is powered by clean energy rather than oil with its destructive effect on the environment.

Facility closures are long-term decisions that aren't intended to be undone, and reopening a refinery would require time to inspect machines, attain permits, assemble staff and train them.

The reason that U.S. oil companies haven't increased production is simple: They decided to use their billions in profits to pay dividends to their CEOs and wealthy shareholders and simply haven't chosen to invest in new oil production.

Even as oil and gas companies' profits soar, refineries across the country are being retired and converted to other uses as owners balk at making costly upgrades and America's pivot away from fossil fuels leaves their future uncertain, The Washington Post reports.

Most of the crude oil produced in the United States is refined in U.S. refineries along with imported crude oil to make petroleum products.

The nation's capacity to refine crude oil into fuel and other products fell below 18 million b/d at the beginning of 2022 and hit its lowest level since 2014, according to the federal government's annual refinery capacity report released June 21.

Are US refineries at 100 %?

American refineries are running full-out, at about 95% of total capacity, contributing more fuel—gasoline, diesel, jet fuel, etc. —to the global market than any other country.

Some of the nation's 129 refineries are owned by large oil companies such as Chevron, while others are operated independently.

Unavoidably, structural fuel demand decline and a heightened global sensitivity towards the carbon intensity of energy will mean a reduction in refining capacity. Dozens of refineries will close in the coming decades.

The United States has adequate refinery capacity to process its current and projected crude production, however the free world oversupply of refining capacity will persist through the few remaining years of increasing world crude oil production and thereafter.

U.S. crude oil production in our forecast averages 11.7 million b/d in 2022 and 12.4 million b/d in 2023, which would surpass the record high set in 2019.

High gas prices have everyone from truckers to politicians demanding more domestic oil production. While drilling is up, oil production in this country is still down from three years ago.

Because refiners consume oil in their plants, refining companies tend to benefit when oil prices fall.

"The U.S. imports oil because consumption of oil products—about 20 million barrels per day—is greater than the quantity of crude oil it produces, about 18 million barrels per day," Kaufmann said. "This difference, about 2-3 million barrels per day, is much smaller than previous years."

As to why they weren't drilling more, oil executives blamed Wall Street. Nearly 60% cited "investor pressure to maintain capital discipline" as the primary reason oil companies weren't drilling more despite skyrocketing prices, according to the Dallas Fed survey.

Whether looking at the price paid by refineries, or the simple cost of production, domestic oil costs more than imported oil. We rate this claim False.

Who owned 90% of all oil refineries in the US?

In 1882, Standard Oil Trust created a network of Standard Oil companies throughout the country, led by a board of trustees, where Rockefeller owned over one third of the certificates. By the late 1880s, Standard Oil controlled 90% of American refineries.

HOUSTON, April 21 (Reuters) - Chemical maker Lyondell Basell Industries (LYB. N) will permanently close its Houston crude oil refinery by the end of 2023, the company said on Thursday. The decision comes after two failed attempts to sell the plant and the closing of five U.S. refineries in the last two years.

Because of infrastructure limitations and an uncompetitive shipping environment, economic access to domestic crude oil and refined products is limited. Even with less capacity, United States refiners are working around the clock to produce fuel for consumers.

The top five source countries of U.S. gross petroleum imports in 2021 were Canada, Mexico, Russia, Saudi Arabia, and Colombia. Note: Ranking in the table is based on gross imports by country of origin. Net import volumes in the table may not equal gross imports minus exports because of independent rounding of data.

Southeast Texas is home to the largest concentration of oil refineries and petrochemical plants in the United States. Th 10 refining facilities located in the Houston Metro Region alone can process 2.6 million barrels of crude oil per calendar day.

Canada refines about 2 million bbls./day. The cost of a new refinery is pegged at $10 billion, and would take years to construct. A new one hasn't been built in Canada since 1984, or in the United States since 1976, although new refineries are in the works in Michigan and Illinois.

US Utilization of Refinery Capacity is at 95.50%, compared to 95.20% last week and 88.80% last year. This is higher than the long term average of 89.63%.

So why do refineries pay so much more? It's partly because of where California gets its oil, said UC San Diego energy expert David Victor. “California gets oil from three places. It gets it from the production of oil here in California, which has slowly been declining over time.

Who owns the largest refinery in the world?

Located in India, the Reliance Industries-owned Jamnagar Refinery is the largest oil refinery in the world. As of 2021, the Jamnagar Refinery held a capacity of 1.24 million barrels per day, topping refineries, such as the SK Energy Co. refinery in Ulsan, South Korea and the Paraguana Refinery Complex.

Consider this: Most US refineries are between 50 and 120 years old, with the average age right about 40. Even the “newest” US refinery with capacity to produce more than 100,000 barrels per day dates to 1977.

Without oil, aviation, shipping and road haulage would cease. Global trade would face major difficulties as a result.”

Texas, home of Eagle Ford, Permian and Barnett shale oil plays, holds more than 60 billion barrels of shale oil alone, Rystad estimates. That is more than the untapped oil in all of China. There are also vast sums of oil beneath the ground in North Dakota, where the Bakken shale oil play sits.

"We produce more oil and gas than any other country in the world." This was confirmed by the Energy Information Administration. The EIA listed the U.S. as the top producer, with 18.61 million barrels per day, equivalent to 20% of the world supply. There was a similar trend, when considering petroleum products as well.

Oil Reserves in the United States

The United States has proven reserves equivalent to 4.9 times its annual consumption. This means that, without imports, there would be about 5 years of oil left (at current consumption levels and excluding unproven reserves).

“We're the world's largest producer, but we're also the world's largest consumer,” she said. The U.S. produces 18.8 million barrels of oil per day but consumes slightly more — 20.5 million barrels per day. (The world as a whole consumes about 100 million barrels per day.)

The drop in capacity was driven by a 13% drop in gasoline consumption, and prices for gasoline and diesel hit a four year low. The result was that five refineries across the US shut down permanently.

Since it opened, more than half the refineries in the United States have closed.

Are American refineries still operating?

As of January 1, 2022, there were 130 operable petroleum refineries in the United States.

“California refineries, similar to U.S. refineries, have been closing due to an onerous regulatory environment, rich inducements to switch to biofuels and to demand destruction due to COVID lockdowns.”

Most of the crude oil produced in the United States is refined in U.S. refineries along with imported crude oil to make petroleum products.

US Utilization of Refinery Capacity is at 95.50%, compared to 95.20% last week and 88.80% last year. This is higher than the long term average of 89.63%.

American refineries are running full-out, at about 95% of total capacity, contributing more fuel—gasoline, diesel, jet fuel, etc. —to the global market than any other country.

The Trans Alaskan Pipeline Authorization Act of 1973 required that all petroleum from Alaska's North Slope be sent to U.S. refineries. In 1995, Congress eliminated that requirement, and between 1996 and 2000 somewhere between 4 and 7 percent of the oil from Alaska was being shipped to China, Japan and Korea.

The nation's capacity to refine crude oil into fuel and other products fell below 18 million b/d at the beginning of 2022 and hit its lowest level since 2014, according to the federal government's annual refinery capacity report released June 21.