Refining Capacity Set to Fall in Europe and US Over Next Decade

Oil refining capacity is set to decline in Europe and the US over the next decade, according to forecasts by S&P Global Energy. The industry is currently operating near full capacity as it struggles to cope with shortages caused by the war in the Middle East.

The Financial Times reports that 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. This will create problems in the future for both Europe and North America.

European refinery capacity is expected to decline by 20% over the next ten years through 2035, to a level slightly above 9 million barrels per day (bpd). In contrast, companies in China, the Middle East, India, and Africa have built large, new, and highly competitive refineries.

Daniel Evans, who is responsible for the oil refining market at S&P Global, notes that recent supply disruptions have forced a reassessment of the strategic importance of the refining industry in the West. However, he believes that this will not change the long-term fundamentals.