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Profits boom on strong demand
Refiners in key locations are benefiting from unprecedentedly high refining margins, driven by strong demand for products and by capacity constraints. With a worldwide move towards cleaner fuels, at a time when crude quality is declining, the need for intensive refining is forecast to grow, Martin Quinlan writes
PART OF the explanation for the rise in refining margins lies in the industry's fundamentals. For many years, worldwide consumption of refined products has been growing faster than the growth in refining capacity. The gap widened over 2004 and 2005, when consumption rose by an increment of 3.804m barrels a day (b/d) while refining capacity increased by 1.895m b/d. Refined products prices have shown strong growth, with gasoline and gasoil prices nearly doubling over the two-year period.  The other part of the explanation lies in the subtleties of refinery operations. High prices for transport fuels have been an incentive for operators to increase throughputs – even at refineries of low complexity, which produce a large volume of residual fuel oil. The excess fuel oil coming onto the market has depressed its price, widening the price differential between fuel oil and transport fuels. But this, in turn, ...Click here to continue reading Profits boom on strong demand
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