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Economics
The profitability of refineries varies widely, across different individual refineries, as well as over time for a single refinery as market conditions change.
Measures of refinery profitability
The economic performance of a refinery can be measured in a number of different ways. Typical measures of refinery profitability are:
- Refinery margins - A measure of the value created per unit of crude oil processed or per barrel of crude distillation capacity
- Refinery returns - The value created by the refinery per unit of capital invested or employed in the refinery
- Refinery asset values - The lump sum value of a refinery, typically for a buyer or seller
Drivers of profitability
There are a number of internal and external factors that have a large effect on refinery profitability. They can be grouped into the following major categories:
- Oil market conditions (prices) – The pricing conditions for crude oil and refined products that determines the potential margin that a refinery can make processing crude to make finished products
- Refinery configuration – The design of the refinery (capacity and complexity) that determines which crude grades the refinery can run and what yield of product it can achieve
- Refinery operating performance – The efficiency and effectiveness of running the refinery
- Refinery commercial performance – The efficiency and effectiveness of sourcing crude oil (and other feedstocks) and selling products (and intermediates)
