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Pandemic Crushes U.S. Refining Capacity

The closure of several refineries in the United States in recent months sent the total petroleum refining capacity down to its lowest level since May 2016, the U.S. Energy Information Administration (EIA) said on Thursday.

As of September 1, 2020, the latest available EIA data, U.S. petroleum refining capacity stood at 18.4 million barrels per calendar day (b/cd).

Earlier this year, total U.S. refining capacity had hit a record high of almost 19.0 million b/cd, but the COVID-induced slump in fuel demand forced the closures of several refineries as refiners moved to shut down permanently some loss-making refineries or convert refineries to renewable diesel production facilities.

The closure of the Philadelphia Energy Solutions refinery in Pennsylvania in May reduced American refining capacity by 335,000 b/cd. Another 19,000 b/cd was removed from the U.S. capacity after Marathon Petroleum’s refinery in Dickinson, North Dakota, was closed while it waits to be converted to a renewable diesel production site.

HollyFrontier said in June it was expanding its renewables business, expecting to produce over 200 million gallons per year of renewable diesel. After 86 years as a petroleum refinery, the plant in Cheyenne, Wyoming, was closed to be repurposed for renewable diesel by 2022. The refinery closed in August, removing another 48,000 b/cd petroleum refinery capacity.

In early August, Marathon Petroleum said it would idle indefinitely two refineries, Martinez and Gallup, which would result in some 800 people losing their jobs.

Marathon Petroleum’s CEO Mike Hennigan said on the Q2 conference call in early August that the refiner expects the current environment “to stay challenged for some time.” 

Marathon Petroleum, like other refiners in the United States, is idling refinery capacity and cutting jobs to cope with the losses stemming from the demand crash in the pandemic.

More refinery closures across the United States are on the cards this winter season, analysts say.   

By Tsvetana Paraskova for Oilprice.com

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