BRUSSELS/LONDON: Hurricane Harvey’s crippling impact on US oil refinery operations this month and the challenge buyers faced in filling the gap in gasoline supplies has exposed a shortage of spare refining capacity around the globe.
Nearly a quarter of US refining capacity was knocked out by the storm this month, driving US gasoline prices to two-year highs above $2 (SR7.5) a gallon. Many plants are still struggling to resume normal operations, prompting other refineries around the world to crank up output to fill the gap.
Global refining is considered to be running at its maximum when capacity utilization is 85.5 percent, the highest level reached in the modern era, BP’s head of refining economics Richard de Caux said.
Today the utilization level is 83 percent, he told the Platts Refining Summit in Brussels, suggesting a very slim buffer.
“The spare capacity is not really there,” said Dario Scaffardi, general manager of Italian refiner Saras. “In as much as consumption worldwide is growing, refinery capacity is not long at all.”
Spare capacity is needed to meet demand when refineries undergo maintenance or face unexpected outages. Too much in reserve is costly for refiners. But Hurricane Harvey has shown the world may not have enough.
Consultant JBC Energy said refiners could process 83 million bpd of crude by the end of 2017. In 2016, BP data showed processing at roughly 80.6 million bpd.
Energy consultancy FGE estimates spare global refining capacity, based on official or nameplate numbers, stands at 14 million bpd, down from 18 million bpd earlier this decade.
But nameplate figures can be misleading, as they are based on capacity of a refinery when built or refurbished. Many cannot match those levels due to years of underinvestment. So actual spare capacity may only be a fraction of that 14 million bpd.
For example, Venezuela’s four refineries have run at record lows this year as they lack spare parts. Plants in Mexico, Brazil and Nigeria have also suffered poor investment for years.
At the same time, demand for oil and its products is climbing, led by China and India, and more developed economies.
“What we have is good demand growth and, ... whilst there are long lists of refinery projects, not many of them are coming through,” said Steve Sawyer, FGE’s head of refining.
Throw Hurricane Harvey into the mix and the shortage in spare capacity becomes increasingly apparent.
“Are we going to assume Venezuelan refinery utilization rates will suddenly jump?” Energy Aspects said. “Or are we going to rely on Nigeria’s dilapidated refineries to fill the gap? None of this capacity is available to the current market.”
“The only country with truly spare refining capacity is China, where environmental restrictions have capped runs,” the consultancy said in a note.
As a result, Morgan Stanley predicts a “silver age” of profits to the end of the decade for refiners as margins rise.
“Refining cycles are historically short and volatile, but there is more visibility than usual, and we expect this strength to continue,” the bank said in a note.
It forecast oil refining capacity would increase by 700,000 to 800,000 bpd in 2018, but would be outpaced by demand for oil products rising by 1.4 million bpd.
“Refinery crude intake probably needs to increase by (roughly) 1.1 million bpd. Hence, global refining utilization is set to stay high in 2018, which will underpin margins again next year,” the bank said.
It forecast BP’s Refining Marker Margin, a benchmark proxy for profits, would rise from $12.8 a barrel in 2017 to $16 a barrel in 2020.
A move to make shippers to use fuel with less sulfur from 2020 will offer further opportunities for refiners to boost margins by supplying more low-sulfur distillates.
“With product demand and refining margins this strong, the world needs more refining capacity not less,” said Nevyn Nah, oil products analyst at Energy Aspects in Singapore.
Stormy weather exposes shortcomings of world’s oil refineries
Stormy weather exposes shortcomings of world’s oil refineries
First EU–Saudi roundtable on critical raw materials reflects shared policy commitment
RIYADH: The EU–Saudi Arabia Business and Investment Dialogue on Advancing Critical Raw Materials Value Chains, held in Riyadh as part of the Future Minerals Forum, brought together senior policymakers, industry leaders, and investors to advance strategic cooperation across critical raw materials value chains.
Organized under a Team Europe approach by the EU–GCC Cooperation on Green Transition Project, in coordination with the EU Delegation to Saudi Arabia, the European Chamber of Commerce in the Kingdom and in close cooperation with FMF, the dialogue provided a high-level platform to explore European actions under the EU Critical Raw Materials Act and ResourceEU alongside the Kingdom’s aspirations for minerals, industrial, and investment priorities.
This is in line with Saudi Vision 2030 and broader regional ambitions across the GCC, MENA, and Africa.
ResourceEU is the EU’s new strategic action plan, launched in late 2025, to secure a reliable supply of critical raw materials like lithium, rare earths, and cobalt, reducing dependency on single suppliers, such as China, by boosting domestic extraction, processing, recycling, stockpiling, and strategic partnerships with resource-rich nations.
The first ever EU–Saudi roundtable on critical raw materials was opened by the bloc’s Ambassador to the Kingdom, Christophe Farnaud, together with Saudi Deputy Minister for Mining Development Turki Al-Babtain, turning policy alignment into concrete cooperation.
Farnaud underlined the central role of international cooperation in the implementation of the EU’s critical raw materials policy framework.
“As the European Union advances the implementation of its Critical Raw Materials policy, international cooperation is indispensable to building secure, diversified, and sustainable value chains. Saudi Arabia is a key partner in this effort. This dialogue reflects our shared commitment to translate policy alignment into concrete business and investment cooperation that supports the green and digital transitions,” said the ambassador.
Discussions focused on strengthening resilient, diversified, and responsible CRM supply chains that are essential to the green and digital transitions.
Participants explored concrete opportunities for EU–Saudi cooperation across the full value chain, including exploration, mining, and processing and refining, as well as recycling, downstream manufacturing, and the mobilization of private investment and sustainable finance, underpinned by high environmental, social, and governance standards.
From the Saudi side, the dialogue was framed as a key contribution to the Kingdom’s industrial transformation and long-term economic diversification agenda under Vision 2030, with a strong focus on responsible resource development and global market integration.
“Developing globally competitive mineral hubs and sustainable value chains is a central pillar of Saudi Vision 2030 and the Kingdom’s industrial transformation. Our engagement with the European Union through this dialogue to strengthen upstream and downstream integration, attract high-quality investment, and advance responsible mining and processing. Enhanced cooperation with the EU, capitalizing on the demand dynamics of the EU Critical Raw Materials Act, will be key to delivering long-term value for both sides,” said Al-Babtain.
Valere Moutarlier, deputy director-general for European industry decarbonization, and directorate-general for the internal market, industry, entrepreneurship and SMEs at European Commission, said the EU Critical Raw Materials Act and ResourceEU provided a clear framework to strengthen Europe’s resilience while deepening its cooperation with international partners.
“Cooperation with Saudi Arabia is essential to advancing secure, sustainable, and diversified critical raw materials value chains. Dialogues such as this play a key role in translating policy ambitions into concrete industrial and investment cooperation,” she added.
