US refining: a history

Aug. 11, 2003
One of the most popular issues of OGJ, especially within the refining industry, is the refinery survey that appears in the annual yearend Worldwide Report.

One of the most popular issues of OGJ, especially within the refining industry, is the refinery survey that appears in the annual yearend Worldwide Report. By far, the most inquiries that I receive regard this annual report.

Given the recent 100-year anniversaries of OGJ and the National Petrochemical & Refiners Association, it is interesting to explore the evolution of the US refining industry as evidenced in the OGJ surveys. A worldwide look would also be worthwhile but, alas, would take more than the one page allotted here.

One trend is that, since its early days, the refining industry has continuously consolidated its operations by shutting down smaller, less-efficient plants. This week's special report, beginning on p. 20, assesses the outlook for future refining trends.

OGJ, until recently, listed the refining surveys for the US and outside the US in separate issues, usually the last issues in March and December. In December 1990, OGJ started listing worldwide refineries in one complete survey.

1924-40

Although the OGJ archives in Houston go back only to 1933, the survey in that year included data as far back as 1914. The data back to 1924 were noted as compiled by OGJ; data before 1924 came from government bureaus.

In 1924, the US had 574 operable refineries with a total crude capacity of just more than 3 million b/cd. These plants averaged 5,300 b/cd in size.

Of the 574 operable refineries, only 362 were operating in 1924, with a throughput of 2.55 million b/cd. Because the first continuous plants started up in the early 1910s, surveys in those days included both pipestills and continuous fractionators.

A notable fact is that refinery utilization rates averaged 90.4% during 1924-40, similar to recent years.

The year 1935 saw the greatest number of operating refineries in the US at just fewer than 500 plants.

1941-69

When the US entered into World War II, the refining industry started adding substantial capacity. A new process, fluid catalytic cracking, made gasoline and diesel much more plentiful. And the refining surveys in the 1940s reflected those trends.

During 1931-41, the US increased refining capacity by an average of only 1.3%/year. By 1945, this 10-year average had risen to more than 3%/year additional capacity.

However, WWII was not the biggest impetus for additional capacity. During 1947-57, the US industry increased refining capacity by an astounding 6.3%/year. Automobiles were much more accessible to the average consumer, and driving became much more of a pastime to the American people.

From 1941 to 1957, US refining capacity increased to more than 9 million b/cd from 4.7 million b/cd. The mean capacity of operable refineries in 1957 was about 28,600 b/cd. The burgeoning petrochemical industry resulted from additional demand for synthetic petrochemicals; most of the feedstocks came from refineries.

By the late 1960s, however, the OGJ survey showed that the 10-year average capacity addition rate had slowed to about 2%/year.

In 1969, the number of operable refineries in the US had dropped to 279, refining capacity was 11.7 million b/cd, and the average refinery size was nearly 42,000 b/cd.

1970-81

In the early 1970s, the OGJ surveys showed that the refining industry experienced another surge of capacity. From 1967 to 1977, the US industry added an average capacity of 5.4%/year. The number of refineries rose to 308 in 1979.

Many of these refineries were planned in the early 1970s, when the US downstream industry enjoyed cheap feedstocks. By the mid-1970s, however, this situation changed drastically when many oil-exporting countries nationalized their oil industries, thereby taking control of their oil reserves and linking prices.

The 1981 OGJ survey showed a peak of 18.5 million b/cd of US refining capacity; however, refiners were only operating about 12.7 million b/cd, for an all-time low utilization rate of 69%.

The average refinery capacity in 1981 rose to almost 61,000 b/cd.

1982-present

After the 1981 peak, US refiners began to shut down less-efficient plants and consolidate operations due to more-stringent environmental regulations and high feedstock costs.

The OGJ survey listed 301 operating refineries in 1982, a number that dropped to 133 in the most recent survey. The industry hit a recent low of 15 million b/cd in 1994 and has slowly recovered to 16.6 million b/cd in OGJ's most recent survey.

Due to all the consolidation, refinery utilization rates increased from about 70% in 1982 to the 90+% levels seen today. And the average refinery size more than doubled since 1982, to nearly 125,000 b/cd.