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Chevron CEO Mike Wirth’s view of U.S. refineries is that there will never be another new refinery building in the United States.
High prices at the pump have triggered a host of discussions around where the market constraints are, but current refinery utilization in the United States—which is at more than 90%--combined with low product inventories and sky-high refining margins, indicates that the bottleneck to getting more gasoline to market is the refining segment—not pumping crude.
But according to Wirth, there may be no relief in sight. In an interview with Bloomberg Markets, Wirth describes his rationale for that belief:
“Building a refinery is a multi-billion dollar investment. It may take a decade. We haven’t had a refinery built in the United States since the 1970s. My personal view is that there will never be another refinery built in the United States.”
According to Wirth, oil and gas companies would have to weigh the benefits of committing capital ten years out that will need decades to offer a return to shareholders “in a policy environment where governments around the world are saying ‘we don’t want these products to be used in the future’”.
In Wirth’s view, they are receiving mixed signals in these policy discussions.
“We need to sit down and have an honest conversation—a pragmatic and balanced conversation—about the relationship between energy and economic prosperity, national security, and environmental protection. We need to recognize that all of those matter.”
Wirth reiterated the industry view that oil and gas producers take a long view of the market fundamentals of supply and demand when settling on capital expenditures. And according to Wirth, it takes years for decisions made today to result in oil.
The unique circumstances of the past two pandemic years have only sought to exacerbate the lag between demand and supply as industry workers fled the industry and wells and refineries were taken offline—some never to return.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.