Petroleum commentary: Refining industry faces a bleak future
Yes sir, putting my foot down on that call… an actual live robocall asked me if I wanted, (not if I needed) our house air ducts cleaned.
After triumphantly slamming the phone down and muttering to myself “mission accomplished!” I picked up the paper and saw that the rumor mill has milled that the banks are also on the brink of posting a “not interested” sign on their doors.
So, we may be talking about negative interest rates, which to me means that the banks will charge you interest on your deposits.
The past is the past because in those times the banks would give you interest on your savings accounts, but the near present may mean they will reverse course and charge you this same interest – a fee for the privilege of saving your own money!
Stop the world I forgot to get on!
The same lack of interest is becoming apparent in the refining sector. It was supposed to be the year of improved refining margins. This thought was mainly driven by the lowered sulphur cap being applied globally on marine fuels, which would have driven up prices for the middle part of the barrel.
Unlike gasoline and conventional diesel, marine fuel is not subject to seasonal mood swings in demand and price. It was believed that this change in formulation would spike ULSD (ultra-low-sulphur diesel) prices with gasoline prices being pulled up in tandem.
Then the virus hit in late winter and tanked demand for any and all refined product coming out of any barrel of crude. Refining margins and run rates are now the lowest in 35 years! This will now mean that the refining industry will have to adapt or perish. A refiner will have to diversify into a petrochemical profile or become a low-carbon renewable refiner business.
If not, it is being predicted that within 10 years – 14% of today’s refineries will close.
This may be music to the tone-deaf ears our petrophobic federal government, as well as all dedicated enviro alarmists – but getting into the dance may prove expensive.
If I were them, I would follow the progress, or lack thereof, of the Come by Chance refinery in Newfoundland and Labrador, which is the main source of all fuels for the province. Unless there is significant financial assistance from Ottawa this plant will close forever.
As gasoline and diesel retail pump prices are regulated in Newfoundland and Labrador, the only alternative is for the wholesale upper price limit, set by the province, be allowed to increase, which will then increase the refining margin and perhaps save the refinery and its jobs.
I wonder to myself what the reaction would be if the Suncor refinery in Montreal were in the same position and was on the verge of closure?
Would Ottawa put up the, “not interested” sign on the plant fence?
You and I both know the answer to that.
You can be sure the employees of the Come by Chance refinery know the answer as well.
~ The Grouch
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The Fed gov needs to buy a 40 percent stake in the refinery and the oil wells by providing a large amount of money and back loans so that China and other foreign interests can not get control. A major factor in Ww2 was the fuel supply. When C 19 is over we need to own are fuel systems for the next 20 years for long haul shipping by air, ground and water.