Pain at the pumps provides boost for refineries

And the boost for refineries is a pain in my. . . wallet.

Jay Saunders, an energy analyst at Deutsche Bank, said that US refineries were unlikely to spend more capital because they had earmarked $20bn (£10.9bn) to upgrade plants for stricter emissions laws, leaving them with little money to expand capacity.

Mr Saunders said: “It’s going to cost more to make gasoline. They will want to wait a few years to see their money back before spending more funds.” Douglas Terreson, an energy analyst at Morgan Stanley, said the oil companies’ conservative view of oil prices was another factor determining future capacity growth.

“We have had oil prices at $25-$30 a barrel for five years and it is only recently that the majors have shifted their rate of return to one based on $20 instead of $16. If it has taken them that long to shift, I can’t see them moving up again for a long time,” said Mr Terreson.

“It is going to take a dramatic slowdown in demand or a recession before this golden period for refiners comes to an end.”

Good news on a Tuesday morning, yes? Note the emphasis on the impact environmental controls are having on new refinery construction. Not a good sign. . . and given the profit margins for oil companies, not something anyone will feel the need to correct anytime soon.