Has World Refining Capacity Maxed Out, Driving Up Product Prices?
•Recent claims of being maximum sustainable capacity are exaggerated
•Comparing world product demand and capacity can be misleading
•Must look at regional utilizations
•However, demand growth is outpacing capacity growth – for the moment
SOne of the problems seems to come from some market observers making a comparison of world product demand and world refinery capacity.  A balance of  83 MMB/D of capacity against 82 MMB/D of demand seems to imply a very tight situation.  But one needs to look more closely.  Petroleum demand is not just supplied by refineries.  For example, the U.S. has over 20 MMB/D of demand and only 16.0  MMB/D of refinery inputs plus 1.4 MMB/D of product imports.  Gas liquids and other hydrocarbons and oxygenates contribute more than 10 percent of supply volume.

SIn order to see a reasonable picture of refinery utilization on a global scale and how that utilization might affect U.S. markets, it is necessary to look at regional refinery markets, since the refinery status in different regions can have different implications for U.S. imports.

SHowever, while our view is  more restrained than some other analysts that state that world refining capacity is “maxing out”, it is correct that product demand is growing faster than refinery capacity in recent years, and the situation could become even tighter if high demand growth continues.