Refinery-runs
Over the last months there have been scores of announcements about refineries that are being planned to be built. When we look globally we see that new refineries are expected in several parts of Africa, Latin America, almost everywhere in the Middle East and quite a few in India, China, Vietnam and a few other countries of the regions.
And although the first plans are already being withdrawn, the question came up what this will mean for the refinery industry, and of course for the price of the products.
As we are seeing ever more clearly that the current global production of oil is at, or close to, its maximum we may wonder what will happen when very substantial refinery capacity will come on-stream in the coming decade, most of it near production-centres or in the emerging economies, whilst there will be not much more oil to process.
Will much of the oil that is now being refined in the “mature” economies just being drawn to the newer
refineries because of economic reasons?
And what would this mean for the refineries in the mature economies?
Will there be just not enough oil to process and therefore prices will go up?
Or will there be excess capacity world-wide and will prices go down?
Or will the main part of the limited amount of the refined products be used up in the emerging economies and therefore not much will be left for the mature economies? And would this mean rising prices? Or another play for the speculators?
Fact is that the expected demand for oil in official statements is far above expected supply. But these are official statements, that in most cases have not yet included the economic downturn that is taking hold of the biggest user of oil & oil-products on the planet, the USA, with very substantial decline in imports. The decline in imports of the USA can currently cover the growth in usage and imports of the emerging economies several times over.
Whilst already for quite some time the call was that there was no shortage and that prices were due to speculators playing in the field, reality is now also reaching these levels and prices are going down.
But what will happen in the longer run, when real shortage starts to make itself known, and what will be the effects on the refineries that currently are being planned and built, may be difficult to envision.
But it might be that we urgently need to speed up the evolution of electric mobility, so we may be able to change from “fill em up” to “charge em up”.
Looking forward,
Alexander
Responses are always welcome at Alexander@gas-oil-power.com
