Massive Oil Refinery On Track To Shut Down Amid Fuel Supply Shortages, Record Prices

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Thomas Catenacci Energy & Environment Reporter
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UPDATE: This article has been updated to include comment from LyondellBasell Industries on its plans to cease operations in 2023.

A key Texas petroleum refinery that produces more than 200,000 barrels of fuel per day is facing a premature shutdown that could increase pressure on domestic fuel supplies.

The Houston, Texas, facility — which is operated by LyondellBasell Industries, spans 700 acres and was built in 1918 — is scheduled to permanently close by the end of 2023, but could shut down earlier if a “major equipment failure” spreads to major units, two people familiar with the issues told Reuters. The refinery processes 268,000 barrels per day (bpd) of oil and produces 92,600 bpd of diesel fuel, 89,000 bpd of gasoline and 44,500 bpd of jet fuel.

“The Houston Refinery is currently operating as planned,” LyondellBasell said in a statement Tuesday to The Daily Caller News Foundation. “LyondellBasell previously announced it will cease operations of the Houston Refinery no later than December 31, 2023. In the interim, the company will continue serving the fuels market, which is expected to remain strong near-term.” (RELATED: The US Hasn’t Built A Major Oil Refinery In Nearly 50 Years. Here’s Why)

LyondellBasell announced in April that it would shut the refinery by 2024 due to the heavy financial burden of upgrading its more than 100-year-old infrastructure, Barron’s reported at the time.

“The company determined that exiting the refining business, by the end of next year, is the best strategic and financial path forward,” the company added in its statement to TheDCNF.

The refinery is among the top 25 largest-capacity facilities in the U.S., according to the Energy Information Administration. Overall, operating U.S. refineries had a capacity of about 17.7 million bpd of oil and produced about 9.5 million bpd of gasoline, 4.7 million bpd of diesel fuel and 1.3 million bpd of jet fuel in 2021.

A worker exits the Marathon Galveston Bay Refinery on May 10 in Texas City, Texas. (Brandon Bell/Getty Images)

A worker exits the Marathon Galveston Bay Refinery on May 10 in Texas City, Texas. (Brandon Bell/Getty Images)

Meanwhile, six refineries with a capacity of about 801,000 bpd of oil have shuttered over the last two years amid the pandemic, federal data showed. In addition, five refineries with a capacity of 408,100 bpd of oil are idle, the largest number of idle refineries since 2012.

“The COVID pandemic really drove down gasoline and diesel demand which accelerated some things that were already happening,” Geoff Moody, the vice president of government relations at the American Fuel & Petrochemical Manufacturers, previously told TheDCNF.

“There was already some contraction happening in the industry as a result of projected declines in U.S. gasoline demand into the future and companies just deciding that the assets were better used as other projects or shut down completely,” he continued. “Some of its been very policy-driven and companies decided that it wasn’t worth it to keep operating those assets.”

But the continued decline in domestic refinery capacity could signal long-term domestic fuel supply shortfall, Reuters reported. Diesel fuel supplies have hit all-time lows on the East Coast and gasoline prices have soared to multiple records in recent weeks.

The Biden administration has reportedly considered addressing the declining refining capacity, but has yet to act on the issue.

The Department of Energy didn’t respond to a request for comment from TheDCNF.

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