Oil prices have fallen precipitously to their lowest levels in nearly two decades. Typically, falling oil prices are a good thing for refiners because they buy crude oil on the cheap and process it into gasoline, jet fuel, and diesel, selling those products at higher prices.
The end consumer also tends to consume more when fuel is less expensive. But the world is in the midst of dual supply and demand shock — too much drilling has produced a substantial surplus, and the global coronavirus pandemic has led to a historic drop in consumption. Oil demand could fall by as much as 20 percentaccording to the International Energy Agency, by far the largest decline in consumption ever recorded. Consumption of jet fuel around the world has plunged by 75 percent.
Average retail gasoline prices in the U. In fact, margins even fell into negative territory, meaning that the average refiner was losing money on every gallon of gasoline produced.
Refineries face shutdowns as fuel demand drops
One of the main strategies that refiners use when a particular product is oversupplied is to alter their processing mix. Facing a glut of gasoline, refiners could switch their operations away from gasoline to a focus on diesel, where margins have not declined by nearly as much. However, some refiners already switched over to diesel following tighter international sulfur regulations on maritime fuels that took effect at the start of this year, which placed a premium on low-sulfur diesel.
There are around 3 billion people on some form of a lockdown around the world.
With no buyers, gasoline is set to pile up in storage. Valero Energy, for instance, recently announced that it would limit output at six of its 12 U. ExxonMobil announced significant cuts to its refineries in Texas and Louisiana, citing the lack of sufficient storage capacity. The danger for some refineries is that they cannot simply throttle back and operate at really low levels.
Report: Half The Texas Refineries Spewing Benzene Above Federal Threshold Are Near Houston
According to Phillips 66, even that threshold might be optimistic. We are now witnessing oil refiners not just cutting runs, but in some markets they are completely shutting down. The problem is a global one. In the U. The situation could unravel rather quickly. The estimated million-barrel-per-day surplus will lead to storage filling up in the next two to three months.
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McCoy - January 27, Today, in the era of a year-old president, a veritable Rip Van Biden, Americans and the rest of the world are, it seems, waking up in a new age.By Bloomberg Wire. Some of the largest U. Gulf Coast refining capacity, according to Lipow Oil Associates. Gasoline prices surged on the disruptions on concern that Laura could approach a level of destruction not seen since Hurricane Harvey in Gasoline futures jumped for a second day in a row, rallying by as much as 5.
Prices were also trading at the highest since before the Covid pandemic sent demand and prices spiralling in early March. However, this time any supply disruptions would be occurring in a vastly different market because of the pandemic.
He added that gasoline inventories are also slightly higher versus a year ago, with diesel stocks much higher. Motiva Enterprises LLC is shutting both itsbarrel-a-day oil refinery and chemical plant in Port Arthur, Texas, according to people familiar with the matter and a regulatory filing.
Oil and gas industry assesses damage at refineries, plants
Valero Energy Corp. Oil major Total SE said it was starting an orderly shutdown of itsbarrel-a-day refinery there. The city of Port Arthur and Jefferson County have issued a mandatory evacuation for some residents. A Motiva official could not be reached for comment. A Valero spokeswoman said the company is monitoring the storms and assessing protocols but did not specifically comment on the shutdown.
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Forget made in Texas.Eight years ago, two environmental nonprofits sued the U. Environmental Protection Agency. The result was a regulation that required more than refineries to monitor — and report — levels of cancer-causing benzene along the perimeters of their facilities and to make fixes when concentrations exceed a certain threshold.
On Thursday, the Washington, D. It found that 10 of them had reported benzene levels above the established threshold over a one-year period that ended in September. Six of those refineries are in Texas, including three in the Houston metro area. Now, EPA needs to enforce these rules. The Environmental Integrity Project stressed that the 10 refineries are not necessarily in violation of the law.
Instead, Nelson said, the governor should direct the agency to better regulate such refineries. Under the rule, facilities must collect air samples at their fence lines every two weeks, and if the average of the highest concentrations of benzene exceeds 9 micrograms per cubic meter of air over a one-year period, they are required to investigate the cause and take action to reduce emissions.
We take seriously our responsibility to reduce our environmental footprint. In a one-sentence statement, Valero pointed out that its current benzene monitoring averages are below the threshold. Short-term exposure to the chemical may cause drowsiness, dizziness and headaches, as well eye, skin and respiratory irritation and even unconsciousness. Long-term exposure among workers has been linked to increased incidence of leukemia and blood disorders.
Women who have inhaled benzene at high levels have reported adverse impacts to their reproductive systems, and adverse impacts to fetal development have been observed in animal testing. While the Trump administration has unwound dozens of other Obama-era environmental regulations on the fossil fuel industry, a final rule it proposed this week keeps in place the benzene monitoring requirement for refineries.
The Texas Tribune is a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.
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An oil refinery along the Houston Ship Channel. Louis Vest. Kiah Collier, The Texas Tribune.Marathon said it plans to use the Martinez facility as an oil-storage facility and is evaluating its future use to produce renewable diesel, a fuel made from industry waste and used cooking oil. About employees work at thebarrel per day bpd Martinez and 27,bpd Gallup refineries.
The largest U.
The closings are not anticipated to result in supply disruptions. Business News News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.
Marathon Petroleum to close its Martinez refinery and convert it to an oil-storage facility job cuts planned with shutdown plan that also includes a Texas refinery. Share this: Click to share on Facebook Opens in new window Click to share on Twitter Opens in new window Click to email this to a friend Opens in new window Click to print Opens in new window.
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Sorry, your blog cannot share posts by email.Climate scientists used two different scenarios to forecast climate impacts on the Houston region, one with no change in reliance on fossil fuels, and one with a transition toward renewable energy to reduce emissions in accord with the Paris Agreement, which many cities including Houston have signed on to independently of the U.
With engineering limits on how much they can throttle back their plants, some refineries might soon have to shut down all together, as motorists stay home in the weeks or months ahead and the limited storage capacity for transportation fuels nears capacity. If more refineries shut, that would pose a severe threat to the oil-dependent economy of Houston and the wider Gulf Coast, with thousands of workers clocking in each day at refiners in communities such as Port Arthur and Baytown. How much more they can reduce their output of gasoline, diesel, jet fuel and other products without shutting down their refineries all together remains unclear.
Typically, the crackers, distillations units and other equipment used in modern refineries are not designed to operate at less than 60 to 70 percent capacity, Todd said. Though some larger refineries, such as those along the Gulf Coast, can operate at less than 50 percent. As a whole, U. For now, energy analysts are projecting U.
But that depends on city and state governments rolling back stay-at-home orders and other social distancing measures as coronavirus cases begin to decline. At the same time, fuel storage tanks, as with those for oil, are already nearing capacity. On Wednesday, the Department of Energy reported gasoline stocks had risen to more than million barrels, 15 percent above levels a year ago as gasoline consumption plunged by more than 30 percent. After a decade of economic growth, during which they enjoyed historically low prices of crude due to the oil boom, U.
Oil refineries face shutdowns as demand collapses
At the same time they have taken steps to cut their losses by adjusting their refinery equipment to produce less gasoline and more diesel, demand for which has not fallen as greatly, with trucks still needed to deliver food and other good during the shut downs.
More: Read the latest oil and gas news from HoustonChronicle. But with massive fixed costs and a large workforce required to run their plants — no matter how much they reduce production — there is only so much cost cutting they can do. Already credit ratings agencies are warning creditors the risk of refineries defaulting on their debt is rising.
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By Aaron Wilson. Most Popular. More Business News.A flurry of activity precedes a major storm like the Category 4 hurricane barreling toward the Gulf Coast right now. People evacuate, stores board up their windows, and governors declare states of emergency in preparation for the chaos and possible carnage to come. Oil refineries — there are many of them in hurricane-prone states — shut down ahead of inclement weather, too. But shuttering these plants creates its own problem: thousands of tons of emissions and hazardous chemicals.
A lot of different chemicals and gases, including volatile organic compounds, carbon dioxide, carbon monoxide, butene, and propane, get released via gas combustion devices flares by refineries during shutdowns, which impacts the environment and nearby communities.
According to a Grist analysis, these 9 refineries will produce an estimated nearly 4 million pounds of excess hazardous chemicals total during their shutdowns. That number is based on estimates provided by the companies themselves and could change in coming days as refineries update their numbers. In a article in the Texas Observer, Naveena Sadasivam now a staff writer at Grist noted that 40 petrochemical plants along the Texas coast produced 5.
Mussel beach. Fast lane. Can't Miss. A man, a climate plan, a pen — America.At stake is cleaner air as well as the jobs of thousands of people and the contributions they and their employers make to the local economy. Congressman Mark DeSaulnier, who represents the district in which some of the refineries including Marathon are located, says he started conversations with labor groups, industry leaders and environmentalists before the pandemic struck because the reckoning for the oil industry has been a long time coming.
Marathon Petroleum, which bought the Martinez refinery inannounced at the end of July it will indefinitely idle the facility and begin laying off its employees in October, canceling contracts that provide temporary employment to between and 2, people at any given time.
The refinery, which started pausing operations in April after coronavirus-spawned lockdowns sent demand for oil plummeting, has mostly produced gasoline and diesel, as well as some propane, petroleum coke and other products. Meanwhile, Marathon is exploring a plan to turn the site into a 48, barrel-per-day renewable diesel operation. It intends to apply for permits to make that switch, company leaders have told Contra Costa County.
Chevron has said it made changes to its refineries in response to the lower demand for oil, although it has not publicly disclosed how that has affected its Richmond plant. Other energy companies with refineries in the area — Phillips 66, Valero, and PBF Energy — have also adjusted production levels since the start of the pandemic. So across the board, it will have an impact. They say the companies should start start scaling down oil refining for export now to ensure workers can be trained to gradually shift into new energy technology jobs.
Contra Costa Supervisor John Gioia told this news organization he has talked to fellow government officials and others about planning for the future. News Environment. Share this: Click to share on Facebook Opens in new window Click to share on Twitter Opens in new window Click to email this to a friend Opens in new window Click to print Opens in new window. By Annie Sciacca asciacca bayareanewsgroup.Emergency shutdown of BP refinery, Dow plant in Texas City
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