Patrick DeHaan is a senior petroleum analyst at gasbuddy.com.
No new refineries built in decades? True or false?
"There have been no new refineries built since 1976" is a phrase commonly placed in stories revolving around high gasoline prices, refinery problems, or oil prices. There seems to be, however, more than meets the eye to this claim. While the phrase is technically correct, there are some glaring omissions that mislead motorists into thinking there has been no capacity added to refineries since the last new facility was brought online in 1976.
The simple truth (which may be hard to believe given that oil companies are generally looked down on), is that oil companies have been busy adding new capacity in the last decade—expansions of all sizes are underway or have recently been completed. The size of some of these expansions adds more than double the capacity of an average refinery.
Let's take, for example, Motiva's Port Arthur, Texas expansion project. Already underway since 2006, this expansion project would add 275,000 barrels of capacity per day to this facility. For reference, the current average size of a U.S. refinery stands at nearly 129,500 barrels per day. The expansion project in Port Arthur would be like adding more than two refineries in this country! The project is slated to be complete and operational in 2012.
While the number of operating refineries has fallen from 254 in 1982 to 137 in 2011, the operating capacity of today's 137 facilities is over 830,000 barrels per day more than it was in 1982. Basically, while we've watched 117 refineries close, capacity has risen. (The Energy Information Administration's earliest records date to 1982.)
Moreover, since 1985, when refinery capacity hit a low of 14.7 million barrels per day, we've seen over three million barrels of capacity added, or the equivalent to 23 average modern day facilities. A stark contrast to the misleading tidbit about having no new refineries built since the 1970's. So while we haven't seen new refineries open in new locations, we have virtually added the capacity of 23 of today's average size facilities—and that is nothing to scoff at.