The capacity for U.S. oil refiners fell in 2021 for the second year in a row
The most recent U.S. government data showed that the capacity for U.S. oil refiners fell in 2021. It fell for the second year in a row due to plant closures that decrease gasoline and diesel production.
The national pump prices are close to $5 a gallon. Strong demand for motor fuels has been impacted by the loss of approximately 1 million barrels of processing capacity over the past three years.
The U.S. Energy Information Administration figures showed a capacity decline of 125,790 barrels per day (bpd) last year on top of the 800,000 bpd drop in 2020.
Sky-high gasoline prices may soon crimp fuel demand as if drivers cut travel, a Dallas Federal Reserve Bank economist said. The national average for a gallon of regular unleaded gasoline was $4.968 on Tuesday, up 62% from a year earlier.
Refining capacity in the U.S. declined 5.4% or 1.03 million bpd to 17.9 million bpd from its peak of 18.98 million bpd in 2019. Capacity in 2021 dropped 4.5% to 18.13 million bpd.
U.S. refinery profit margins are on the rise despite rising oil and gas costs, while demand for gasoline, diesel and jet fuel is increasing. According to analysts, demand may continue to rise with low unemployment in the U.S. and pent-up demand for travel.
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The biggest factor in the latest decline of refining capacity was closure of the 255,600-bpd Alliance, Louisiana, refinery, following extensive damage from last year's Hurricane Ida. This has only been partly offset by increased capacity at other refineries, according to EIA.
As capacity declines, fuel demand is increasing due to the global recovery from the COVID-19 pandemic. Moreover, changes in market flows due to the Russian invasion of Ukraine have placed new strains on U.S. refiners. The nation's power plants are running at about 94% of operational capacity, the highest level since September 2019.
Reference:
Seba, E. (2022, June 22). U.S. oil refining capacity down in 2021 for second year. Retrieved from https://www.reuters.com/business/energy/us-oil-refining-capacity-drops-2021-2d-straight-year-eia-2022-06-21/