Marginal configuration

Marginal configuration is the refinery configuration that is operating at the margin in a market, balancing refined product supply and setting market conditions by its break-even economics.

Marginal configuration is one of the key price-setting mechanisms for refined products markets. Under tight market (high utilization) conditions, the marginal configuration shifts to a less complex configuration, forcing margins to improve to bring that configuration to economic break-even levels. Under lower utilization conditions, the marginal configuration shifts to more complex configuration, reducing the margin condition needed to be at economic break-even.

The type of configurations likely to be marginal (price setting) vary across markets based on differences in refinery capacity and demand volatility.

The Refinery Reference Desk includes content derived from our industry experts as well as from public data sources such as company websites. Nothing herein is intended to serve as investment advice. This material is based on information that we believe to be reliable and adequately comprehensive, but we do not represent that such information is in all respects accurate or complete. McKinsey Energy Insights does not accept any liability for any losses resulting from use of the content.

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