Los Angeles, CA (PRWEB) May 11, 2013
The Petroleum Refining industry has slowed down over the past five years. Initially, rising crude oil prices powered revenue growth as refiners passed costs down the distribution line. Firming global growth and ongoing tensions in the Middle East have pushed up the price of oil from its recessionary lows. Robust demand from emerging economies, which require more energy to build up infrastructure, has supported crude oil exports, says IBISWorld industry analyst David Yang. Furthermore, low domestic crude oil prices compared to international crude oil bolstered the competitiveness of US petroleum exports. Consequently, in 2011, the United States became a net exporter of refined petroleum products for the first time in many decades; this continued in 2012. However, in 2013, crude oil prices are expected to fall 6.6% due to slowing international demand and steady production. According to the Energy Information Administration, petroleum product prices are also estimated to decline 5.6% during the year. As a result, industry revenue is expected to fall 7.2% to $731.3 billion in 2013, leading to an annualized decline of 1.6% from 2008 to 2013.
Weakened demand during the recession made it difficult for operators to pass down crude oil costs to customers, which hurt industry profitability. Furthermore, domestic crude oil prices have risen and converged to international prices, causing exports to slow as prices for domestic petroleum rose. On the other hand, while industry revenue has contracted over the past five years, this decline is mostly due to extremely poor revenue performance in 2009 due to the recession. Revenue is expected to decline in 2013, but has otherwise been recovering strongly since 2010. The Petroleum Refining industry has a moderate level of market share concentration. In 2013, the largest companies are ExxonMobil Corporation, Valero Energy Corporation, Phillips 66 Company, Chevron Corporation, Royal Dutch Shell PLC, Marathon Petroleum Company and BP PLC. Due to the high capital costs required to maintain refining facilities, large companies dominate the industry. In the past five years, operators divested assets to pad profit margins during the recession, causing market share concentration to fall during the period, says Yang. This downward trend continued as Brent crude oil prices soared, limiting the profitability of coastal refineries and encouraging some to exit the industry. On the other hand, refineries located inland have access to the cheaper West Texas Intermediate crude variety. Cheaper input costs allowed these refiners to expand their profit margins, and therefore their facilities. Additionally, major player BP has steadily divested its US assets since the Deepwater Horizon oil spill. The company's refineries were sold to industry operators Tesoro and Marathon Petroleum, which resulted in lower overall market share concentration.
This industry is anticipated to expand steadily during the next five years as fuel prices rise alongside consumption growth. Stronger global growth will boost demand for petroleum products, making it easier for operators to pass down costs. Capacity upgrades will lead the way as industry players invest in infrastructure that can handle more crude oil. However, environmental regulations stipulating the inclusion of renewable fuels will pose a challenge to operators. Growth in petroleum consumption is anticipated to slow as consumers increasingly adopt fuel-efficient technology. For more information, visit IBISWorld’s Petroleum Refining in the US industry report page.
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IBISWorld industry Report Key Topics
Companies in this industry refine crude oil into petroleum products. Petroleum refining involves one or more of the following activities: fractionation, straight distillation of crude oil and cracking. This industry does not include companies that extract crude oil or retail gasoline.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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