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In the low oil price environment, many major companies are slashing their capex for 2015 while also downsizing operations to limit the impact on share prices. While consumers may rejoice at gasoline prices dropping for 88 days consecutively to $2.394 at the pump, the lowest in five years, one sector of the oil and gas industry is also seeing the benefits of low oil prices.
Thanks to the oil glut in the U.S., demand for refining has grown massively, with many refineries running at over 90% capacity thanks to oil reaching prices not seen for five years. US refining capacity has reached approximately 17.8m b/d, an increase of 400,000 b/d from two years before.
In addition to the benefits of cheap oil, many refineries are located strategically near export terminals which facilitate the cheaper export of refined petroleum products. The continuation of the long-standing ban on U.S. crude exports, while bad news for U.S. shale producers, is good news for refiners especially those located near key US shale plays.
One such company, Valero, is adding refining units in Houston and Corpus Christi, Texas in order to process crude from the nearby Eagle Ford shale play. With the upgrades expected to be completed by the end of 2015, the largest refiner in the U.S. is banking on shale production remaining high for some time.
In addition to Valero, ExxonMobil has reported a 38% increase profits in spite of the current low oil price environment thanks, in large part, to its extensive refinery network. With the company predicting both a rise of 35% in global energy demand by 2040 and the U.S. finally becoming a net exporter of oil and natural gas, it is one company that is well positioned regardless of oil price fluctuations.
With the average U.S. household set to save on average $550 on gasoline costs in 2015, reaching the lowest average fuel spend for 11 years according to the EIA, both the automotive and refining industries as well as consumers may hope for oil prices to continue declining for some time.
By Evan Kelly of Oilprice.com
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