Oil refining capacity in Europe and the U.S. will decline over the next decade, while it will continue to grow in the Middle East, Africa, and Asia, according to forecasts by S&P Global Energy experts.
Western governments are urging companies to expand refinery capacity to ensure uninterrupted supplies of critical resources during future crises, but investors are reluctant to fund new projects, which will create problems in the future—both in Europe and North America, the Financial Times reports.
This year, refineries in the U.S. and Europe are operating near full capacity as the industry struggles to cope with shortages caused by the war in the Middle East, and they are generating high profits.
According to a forecast by S&P Global Energy, European refinery capacity will decline by 20% over the next ten years through 2035, to a level slightly above 9 million barrels per day (bpd). Last year, facilities with a combined refining capacity of about 500,000 b/d were shut down in Europe, and the United Kingdom, for example, lost two of its six refineries.
S&P Global Energy also expects U.S. capacity to decline by 7% over this period, to 16.7 million bpd.
The energy crisis caused by the war in the Middle East has not altered the industry’s trajectory, notes Daniel Evans, who is responsible for the oil refining market at S&P Global.
“Recent supply disruptions have forced a reassessment of the strategic importance of the refining industry in the West. But does this change the long-term fundamentals? I would say most likely not,” he noted.
Unlike in North America and Europe, companies in China, the Middle East, India, and Africa have built large, new, and highly competitive refineries.
