Chilly Climate for Oil Refiners

Only a few years ago, a cry went up that the United States needed more oil refineries. The perceived shortage was so acute that George W. Bush, president at the time, even offered disused military bases as sites for building them. Not only did that never come to pass, but the reverse is now happening. The business of oil refining is mired in a deep crisis, with five refineries having shut down this year, including plants in Delaware, New Jersey, California and New Mexico. Gasoline demand, which many analysts had long expected to keep rising for decades, is down sharply in the recession. And refiners are increasingly convinced that even after the economy recovers, demand will not grow much in coming years because of the rise of alternative fuel supplies and the advent of tougher efficiency standards for automobiles. Plagued by boom-and-bust cycles of rapid expansion followed by sharp belt-tightening, refining companies have often struggled to operate at a profit. That is a contrast to the production side of the oil business, long a road to riches. “Oil production creates wealth, but oil refining has often destroyed it,” said Costanza Jacazio, an analyst at Barclays Capital in New York. Even so, these are unusually harsh times for oil refiners. The recent drop in gasoline demand could result in more refineries being closed in the coming year...read more