LyondellBasell fire shows how rapidly refining capacity can shrink

Barbara J Powell 6/16/2022

(Bloomberg) — The 30-minute fire at LyondellBasell Industries NV’s Houston refinery Tuesday underscored just how quickly U.S. gasoline production can fall at a time when the country is experiencing record-high prices at the pump. 

The blaze took out a big coker vital in fuel production and forced the 270,000 barrel-a-day oil processor to cut crude rates for what might be weeks. More than 1 million barrels a day of US capacity has been permanently shut over the last three years. As a result, US refiners are using nearly 94% of their current capacity and still struggling to meet the strong demand for gasoline during the summer driving season. 

With retail gasoline prices averaging above $5 a gallon, the US economy and owners of cars and trucks have the most to lose in this race to supply more fuel to a hungry market. Refiners themselves have pushed back maintenance to keep capacity high, with fingers crossed they can keep unplanned outages to a minimum. 

Adding US refining capacity can take months and even years, an inconvenient fact that complicates President Joe Biden’s call for “immediate action” to increase refining capacity to stem runaway gasoline prices.

LyondellBasell’s Houston refinery is already earmarked for closure by the end of 2023 and one-too-many costly repairs might tempt the company to close sooner than later. 

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