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Oil refining passes peak

March 14, 2010

A few weeks ago I posted a question asking if oil consumption in the U.S. hit its peak in 2007 and will not reach those levels again even after the recession ends. There is more evidence that consumption has indeed peaked because oil companies are now looking at ways to reduce refining capacity. If you can remember back as far as 2006, there was much hand wringing that no new oil refineries had been built in the U.S. since the ‘70s and gas lines were around the corner. Now there is 3 million bpd of idle capacity here and in Europe that will have to be taken offline to get oil companies’ production back into the black.

Let’s face it, most of us thought that oil consumption was on a permanent increase, or at least we were still years away from hitting the peak. Oil consumption rates were like housing prices, they never go down. We were wrong about that too. The Tribune quotes BP CEO Tony Hayward saying, “None of us will sell more gasoline than we did in 2007.”

While I feel bad for people that stand to lose their jobs, (Chevron may cut 2,000.) oil producers closing a few older and less efficient refineries would not necessarily be a bad thing. Of course hurricane-induced outages could be a problem, but in general, concentrating production in a smaller fleet of more sophisticated and cost-effective plants would help rebuild profitability. Some of those plants might also benefit from some long overdue improvements to their plant automation systems. There are plenty of ideas here at Control Engineering.