Why are there no new Oil Refineries built lately when price of Oil today is higher than it was 50 years ago?
In: 196
Existing ones have expanded quite a bit. US has been a net exporter for a lot of oil products and gas for a few years now.
>In 2020, the United States became a net exporter of petroleum for the first time since at least 1949.1 In 2022, total petroleum exports were about 9.52 million barrels per day (b/d) and total petroleum imports were about 8.33 million b/d, making the United States an annual net total petroleum exporter for the third year in a row. Total petroleum net exports were about 1.19 million b/d in 2022.
https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php#:~:text=In%202022%2C%20total%20petroleum%20exports,million%20b%2Fd%20in%202022.
The price of building a refinery is up significantly compared to 50 years ago as well. With additional costs due to environmental regulations and such, likely much more so than the profits from refining.
Lots of good answers already but don’t forget, they slowed down output when Covid hit because demand died instantly. They haven’t really gotten anywhere close to previous outputs because they want to keep the supply low to continue to keep demand high even though usage is back to pre pandemic levels. It’s the reason for record profits. They probably figure it’s the last time things will be this good so ride it as long as they can.
There is also the “not in my back yard attitude”. There are entire states that will not allow one to be built in their state, yet more than happy to have cars driving up and down their highways and jets land in their international airports.
I’m actually qualified to answer this because I’ve worked at the most recently built US refinery and currently work for others with the company.
1. Refineries are fucking expensive. Even minor projects which can still be in the million dollar range are still cheaper than building whole new units.
2. No one wants to have a new refinery built in their neighborhood. Understandable.
3. We really don’t need to, the US is a net exporter of refined products and our refineries don’t run at full capacity. This is why refiners such as Marathon are able to afford shutting down a refinery to convert it to a biodiesel or other renewables plant. Also, most refineries have not used all of their owned land and have the option for unit expansion in the future if necessary.
Oil refineries are actually incredibly low margin businesses compared to other parts of the oil and gas industry. The refinery and gas station cuts of the profits are the smallest in the entire cycle of fuel production. The big money is made by the drillers who can pump oil when it’s high value and curb production when it’s low. Refineries on the other hand have no easy ability to ramp up or ramp down. Changing up production to maximize profits is a costly endeavor and is only done 2-4 times a year.
Regulations are also an issue. If you want to innovate you can do so with improvements to create efficiencies that give you an advantage on competitors. Refineries are not permitted to be innovative. They have to go through a costly and expensive regulatory process that almost never goes in their favour. Building a new refinery just means competing against existing refineries that have maximized efficiencies they’re permitted to…. so you really have no competitive advantage on them. When you build a new refinery they can just expand their current one to push you out of the market.
Finally, there’s a current political mood that is particularly anti-oil all around the world. It’s difficult to find investors to build a new multi-billion dollar business that might get shut down by government at any point. Investors like steady stable revenue… they don’t like something so unstable.
Because thermodynamics.
They cost a lot and oil is not as efficient as modern EV equivalents.
because “gestures broadly at the recent industrial/ecological impacts of oil extraction/refining”
Latest Answers