Gasoline demand helping refiners soar through the downturn 

Source: Nathanial Gronewold, E&E reporter • Posted: Thursday, May 21, 2015

HOUSTON — Business remains good for the nation’s main refineries and stands to get much better, even as the collapse of oil prices continues to roil their suppliers.

Refining companies are reporting robust earnings and a profitable outlook, benefiting as they are from lower input costs and expanding export opportunities. Industry insiders are also very optimistic about the near future, predicting rising demand for their products lifted by strong growth in the global economy.

“This is a good time to be a refiner,” said Joseph Israel, CEO of Par Petroleum, during a discussion here at the annual North American Refined Products conference, hosted by the price tracking firm Platts.

Though economic growth is lagging in much of the developing world, and worries mount that the United States’ economy could be faltering in the first half of this year, Par painted an overwhelmingly rosy economic picture. His firm’s outlook projects global gross domestic product growth of 3.3 percent this year fueling worldwide crude oil demand growth by 1.6 million barrels per day in 2015, stemming mostly from developing countries’ growth in fuel consumption.

Israel estimated that gasoline demand in the United States expanded by about 3 percent during the first three months of the year. His company also expects to see much stronger demand for gasoline and distillates in Europe and Asia this year.

He pointed to other bullish indicators for refining companies, including rising sales of sport utility vehicles in the United States and the perceived declining interest in more fuel-efficient hybrid vehicles.

He saw little problem with U.S. refineries absorbing large volumes of domestic light sweet crude production as output of domestic crude is anticipated to flatline this year. “Utilization rates in the U.S. continue to push higher and higher,” Israel said.

Refining companies say they are still wary of talk over a partial or complete lifting of restrictions on crude oil exports from the United States, but they are not completely opposed to the idea. Some experts predict that allowing freer exports of crude will hurt East Coast refineries the most and would crimp the profitability of other refining centers while raising domestic fuel prices at the pump. Proponents of removing export restrictions contend that the additional supply of oil in the international market should help to lower crude prices.

Michael Grande, a director at Standard & Poor’s Ratings Services, said that refining companies have retained their creditworthiness. But he warned that the outlook could darken if the oil export restrictions are removed.

The refining industry would prefer a more comprehensive reform of energy policy should the federal government move to free up the crude export market. Chief among their priorities would be an end to the Jones Act, which acts to inhibit investment in domestic waterborne transportation of oil and petroleum products.