The State of U.S. Refining: Increased Output, Canadian Ties

Even during the most recent period, when margins were low and projects were cancelled, the refining industry continued to produce. Schild showed figures from the Energy Information Association that reveal the refining industry stood at just under 18 million barrels per day at the beginning of this year, which is equal to where it stood at the beginning of 2009. Although the industry took a dip with the rest of the country from mid 2007 through 2008, compared to manufacturing in general it did well, operating at about 85% capacity in 2009 compared to about 70% for manufacturing.

“One reason this is significant is that each refinery is an important provider of high quality jobs and a contributor to the nation’s economy. Even small refineries have significant employment influence,” Schild pointed out.

Still, refining is driven largely by energy and transportation needs, and those needs will only grow in this country as well as the world. Schild pointed to IEA figures that show that the world will require 49% more oil than it is consuming today by 2035 (Figure 1), and that the U.S. will consume 20% more (Figure 2).

One of the strengths for North America is the business that can be done—both in supply and demand—between Canada and the U.S. Although people tend to think that the majority of U.S. imports from foreign counties comes from Canada, that’s a myth, Schild said (it’s about a quarter—the rest comes from other places around the world). Still about 75% of the crude source for this country is either domestic supplies or Canadian sources, “which is pretty impressive. If we don’t have policies that preclude bringing in more resources from Canada, that number will grow,” she said. She pointed to the proposed Keystone pipeline, which is designed to carry heavy crude from Alberta tar sands to refineries on the Texas Gulf Coast. U.S. refineries have been processing such heavy oil for years from places such as Venezuela and Mexico, but those sources are on the decline.

“It is not new to be refining oil sands; we have been doing it in the U.S. for a decade. What we are trying to do is refine more of it,” she said. Doing so could bring $775 billion dollars to the U.S. GDP over the next 25 years.

Schild pointed to figures from the EnergyTomorrow.org website that estimate by 2030, 92% of America’s liquid fuel needs could be met by the U.S. and Canada if smart policies are followed.

Genilee Parente is managing editor of Valve Magazine. Reach her at gparente@vma.org. For additional questions on Cindy Schild’s presentation, contact her at cschild@api.org.