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The U.S Oil And Gas Refining And Marketing Industry

1815 words - 7 pages

The U.S Oil & Gas Refining & Marketing Industry
According to the GAO report, the U.S. petroleum refining industry experienced a period of high product prices and industry profits from the early 2000s through to 2007. ( United States Government Accountability Office , 2014). Since the recession of 2007 to 2009,the industry has been in transition ( United States Government Accountability Office , 2014). The three major changes that have recently affected the domestic petroleum refining industry include:
Increased production: According to GAO, the U.S. and Canadian crude oil production have increased, resulting in lower costs of crude oil for some refiners.( United States Government Accountability Office , 2014). It observed that after significant decline in decades, monthly U.S. crude oil production increased over 55 percent compared with average production in 2008 ( United States Government Accountability Office , 2014).
Declining consumption: The domestic consumption of petroleum products declined by 11 percent from 2005 through to 2012, resulting in a smaller domestic market for refiners ( United States Government Accountability Office , 2014).
Key regulations: According to the GAO, the two major regulations namely, the Environmental Protection Agency’s (EPA) and Department of Transportation’s (DOT) coordinated fuel economy and the greenhouse gas (GHG) vehicle emission standards, as well as EPA’s Renewable Fuel Standards (RFS) have contributed to declining petroleum-based fuel consumption. For some refiners, adherence to the RFS increased costs in the first half of 2013, although costs have significantly declined to some degree from their peak ( United States Government Accountability Office , 2014).
The U.S Refining Industry Outlook
The outlook of the U.S. refining industry depends on a number of factors. According to the GAO report, they include the future domestic consumption of petroleum products, the extent to which key environmental regulations raise costs for domestic refiners and the degree to which domestic refiners will be able to export and compete in international markets ( United States Government Accountability Office , 2014)
Future domestic consumption of petroleum products: According to EIA estimates, domestic petroleum product consumption declined by 11 percent from 2005 through 2012. Additionally, forecasts reviewed project consumption of three major petroleum products namely gasoline, diesel, and jet fuel, will be stable to slightly increasing till 2020, but not reverting to high levels of the past ( United States Government Accountability Office , 2014). Also, forecasts indicated that the level of future domestic consumption i.e. the size of the domestic market for petroleum products might affect U.S refinery production. ( United States Government Accountability Office , 2014). Some of the factors that can affect future domestic levels include: economic growth, crude oil and petroleum product prices and shifts in consumer...

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