Refineries Earn Profit with the Surge in Petrol Prices
As the data show, oil refineries are drawing around five times as much revenue deriving from refining petrol similar to what they did a year before. The fuel cost has reached a record level high due to the shortage of the capability to refine petrol and diesel out of crude oil, thus heightening the profits for the refinery vendors.
Petrol prices are at their peak however the cost of oil is still under the record levels. An industry that was already at its full power has pushed itself as it faces the deficit of supplies from Russia.
Petrol prices saw the sharpest rise on Wednesday in the last seventeen years, and the expense of filling a standard family car crossed GBP 100 on Thursday, loading costs on motorists. One of the reasons for the rise in the price of crude oil, which is at present more than USD 120 per barrel, is due to the concerns related to the war in Ukraine which is cutting entry of resources from Russia. This has resulted in billions of pounds of additional profit for oil producers and pushed the government of the United Kingdom to impose GBP 5 billion windfall tax on North Sea-based oil manufacturers. Nevertheless, the firms or oil refiners producing diesel, petrol, and other products using crude oil are witnessing increasing profits too. Neil Crosby, senior analyst at OilX a data firm stated that the at present refiners are gaining more profit than they have ever witnessed. The lack of the refining capacity has resulted in a significant rise in the “refining margin” – that is the difference between what it costs to pay for crude oil and what they actually earn by trading the refined commodities.
Mr. Crosby added that this is a true crisis in terms of the industry’s capability to manufacture these fuel products. This in turn impacts the wholesale cost of diesel and petrol. In addition, this has also added to the fact that though oil prices are, yet some way reached record-high levels, the cost of petrol and diesel has been placing new records on a daily basis. Refinitiv, a data organisation, statistics show how the refining oil industry has witnessed so much profits in the last year. Oil refining companies were making USD 9.26 per barrel from processing petrol, and USD 6.84 per barrel processing diesel, on June 8, 2021. These companies were earning USD 43.11 on petrol, up 366 percent, and USD 51.13 on diesel which was up by 648 percent, on Wednesday.
ExxonMobil, the US oil leader that owns many refineries, including Fawley in Hampshire, which is UK’s biggest refinery. In May the Financial Times cited ExxonMobil’s chief executive Darren Woods as stating that he never thought that such a “high margin environment” was good for economies around the world.” This was contested by a source close to a leading refinery owner that the refinery companies do not establish the margins themselves. However, the costs of crude oil, petrol, and diesel are all set by the market based on what are the available supplies and how much will the buyers pay for them.
A lot of European petrol and diesel supply was done by Russian refineries and were imported in tankers before the incursion of Ukraine. Around 18 percent of the UK’s diesel supply came from Russia in 2020. Although this supply is not cut off completely, however, the supply volumes from Russia have come down drastically as buyers reject exports even before penalties are completely put into action. The global shortage of refining power has caused high fuel prices in other nations, which includes the US as well.