GAO report links changed US refining outlook to main causes

Higher North American crude oil production, shrinking product markets, and a pair of federal regulations have significantly affected the US refining outlook, the US Government Accountability Office said in an Apr. 14 report.

It said US and Canadian crude production have increased, leading to lower feedstock costs for some US refiners. “After generally declining for decades, monthly US crude oil production increased over 55% compared with average production in 2008,” GAO said.

US consumption of petroleum products declined by 11% from 2005 through 2012, resulting in a smaller US market for refiners, it continued. GAO partly traced that decline to two federal regulations: the US Environmental Protection Agency and Department of Transportation’s coordinated fuel economy and greenhouse gas vehicle emission standards, as well as EPA's Renewable Fuel Standard.

“For some refiners, compliance with the RFS increased costs in the first half of 2013, though costs have since declined to some degree from their peak,” the report said. According to some stakeholders GAO contacted, this was primarily due to RFS requirements exceeding the capability of the transportation fuel infrastructure to distribute and the fleet of vehicles to use renewable fuels.

“Moreover, EPA has missed the statutory deadline to issue regulations establishing annual RFS blending standards since 2009,” it continued. “EPA has not systematically identified the underlying causes of these delays or changed its approach in order to avoid them. A late RFS contributes to industry uncertainty, which can increase costs because industry cannot plan and budget effectively, according to some stakeholders.”

GAO said US refining’s future depends on demand, with projections ranging from stable to slightly increasing through 2020 but not returning to consumption levels of the past; costs of key regulations, such as RFS compliance; and foreign markets, on which US petroleum product manufacturers have increasingly relied.

The extent to which US refiners export products will depend on their ability to compete, the congressional watchdog service said. Factors that may affect this include US environmental regulations, US and Canadian crude production levels, and the balance between global refining capacity and petroleum product demand, it indicated.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

ConocoPhillips, Suncor join Shell in deepwater exploration off Nova Scotia

06/11/2014

ConocoPhillips and Suncor Energy Inc. are joining Shell Canada as partners in exploring the deepwater Shelburne basin off Nova Scotia.

Osum to purchase Orion project from Shell for $325 million (Can.)

06/11/2014

Osum Oil Sands Corp., Calgary, plans to purchase the Orion oil sands project in Alberta from Shell Canada for $325 million (Can.).

MARKET WATCH: NYMEX crude oil stays above $104/bbl; OPEC quota unchanged

06/11/2014 The crude oil contract price for July delivery fell modestly June 10 yet still hovered above $104/bbl on the New York market as participants awaite...

EIA: US oil production in 2015 expected to be highest since 1972

06/10/2014 Total US crude oil production in 2015 will reach its highest level since 1972, the US Energy Information Administration forecast in its Short-Term ...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected