Increased production. U.S. and Canadian crude oil manufacturing have increased, leading to decrease costs of crude oil for some refiners. After generally declining for many years, month-to-month U.S. crude oil manufacturing increased over fifty five % compared with average manufacturing in 2008.
Declining consumption. Domestic consumption of petroleum merchandise declined by eleven p.c from 2005 by means of 2012, resulting in a smaller domestic marketplace for refiners.
Key Static And Dynamic Seals For Pyrolysis laws. Two key regulations—the Environmental Protection Company’s (EPA) and Department of Transportation’s (DOT) coordinated fuel economy and greenhouse gasoline (GHG) automobile emission standards, as well as EPA’s Renewable Gasoline Standard (RFS)—have contributed to declining petroleum-primarily based gasoline consumption. For some refiners, compliance with the RFS increased costs in the primary half of 2013, although costs have since declined to some degree from their peak. Based on some stakeholders GAO contacted, this was primarily because of RFS requirements exceeding the aptitude of the transportation gas infrastructure to distribute and the fleet of autos to use renewable Project Performance fuels. Furthermore, EPA has missed the statutory deadline to situation rules establishing annual RFS blending standards since 2009. EPA has not systematically identified the underlying causes of those delays or modified its method with the intention to keep away from them. A late RFS contributes to industry uncertainty, which can enhance costs as a result of business can’t plan and price range effectively, based on some stakeholders.
Stakeholders GAO contacted and information reviewed typically urged that the U.S. refining industry’s outlook depends upon the following factors:
Domestic consumption. Future consumption of petroleum products is uncertain, with projections starting from stable to barely rising by 2020 however not returning to consumption ranges of the previous. Forecasts GAO reviewed recommend increased future refinery production in eventualities with greater domestic consumption.
Costs of key regulations . The extent to which requirements in the important thing laws improve prices for refiners will have an effect on the industry’s outlook. For instance, future costs to comply with RFS could depend on the annual renewable gas volumes EPA units and whether or not EPA points annual RFS standards on time. Typically, growing prices may be absorbed by refiners (i.e., by lowering their earnings), be handed on to shoppers by larger costs, or both.
Foreign markets. The U.S. refining trade has increasingly relied on foreign markets. Exports grew from 7 % of manufacturing in 2007 to 17 % in 2012. The extent to which domestic refiners export their merchandise will rely on the competitiveness of U.S. refiners. Factors that will have an effect on competitiveness embrace domestic environmental rules, ranges of U.S. and Canadian crude oil manufacturing, and the stability between international refining capability and demand for petroleum merchandise.
Why GAO Did This Study
The U.S. petroleum refining industry—the largest refining business in the world—experienced a interval of high product prices and business earnings from the early 2000s through about 2007. Since the recession of 2007 to 2009, the trade has been in transition.
Federal and state businesses regulate petroleum refining and the use of petroleum merchandise to guard human well being and the environment, in addition to for other functions. EPA, DOT, and California just lately proposed or strengthened 5 key regulations, including EPA and DOT’s coordinated gas financial system and GHG vehicle emission standards, and EPA’s RFS, which has required that refiners and others ensure transportation fuels embrace growing amounts of renewable fuels resembling ethanol produced from corn.
GAO was requested to supply information on the home petroleum refining industry. This report examines: (1) major changes which have lately affected the business and (2) the future of the trade. GAO reviewed data together with studies by agencies and consultants and company monetary filings; interviewed stakeholders, including agency officials and representatives of refiners and environmental organizations; and reviewed forecasts by the Vitality Info Administration and others.
What GAO Recommends
GAO recommends that EPA identify the underlying causes of delays in issuing RFS standards and implement a plan to problem RFS standards on time. EPA generally agreed with GAO’s findings and suggestions.