The U.S. oil and gas boom may be slowing down, but the refining industry is booming. American refineries are taking in more petroleum than at any point in the last 25 years — refineries took in more than 17 million barrels of crude oil per day over the last four weeks, turning it into fuels and petrochemicals.
Most of the media focus has been on faltering U.S. oil production due to relatively low crude prices. But that’s only one side of the story, because while low crude oil prices aren’t all that great for drillers, they mean big profit margins for refiners. Now, refineries all over the country are ramping up operations to pump out more petroleum products.
“Lower crude oil prices and strong demand for petroleum products, primarily gasoline, both in the United States and globally, have led to favorable margins that encourage refinery investment and high refinery runs,” according to the Energy information Administration. “Higher demand for gasoline is supporting these margins.”
News of booming refinery margins and utilization rates shows the flip side to lower oil prices. Even as U.S. production has tapered off a bit in recent months, the country is still producing huge quantities of hydrocarbons — oil and natural gas — that need to be refined. As EIA notes, “U.S. motor gasoline product supplied is up 2.9% through the first five months of 2015” and “demand is also higher in major world markets such as Europe and India so far this year compared with 2014.”
It’s kind of like the perfect storm for refiners right now. But don’t think this situation can last forever, as EIA notes that “U.S. refinery runs tend to peak in the second and third quarters of the year when demand for gasoline is greater because of increased driving in the summer.” Despite a decline in refinery utilization expected later this year, EIA expects it to reach higher levels next year.
“Following the winter period of lower demand and refinery maintenance, [EIA] expects U.S. refinery runs will reach new highs next summer, averaging 16.9 million b/d in third quarter of 2016,” the agency reported.
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