U.S. refining capacity shrinks 4.5% as pandemic shuts plants

A view of the Tesoro refinery in Martinez, California, February 2, 2015. Marathon later acquired the facility and closed it in 2020. REUTERS/Robert Galbraith (UNITED STATES)/File Photo

HOUSTON, June 25 (Reuters) - U.S. refining capacity last year fell 4.5% to 18.13 million barrels per day (bpd) from a record 18.98 million bpd a year earlier, the U.S. government reported on Friday, reflecting weak demand for motor fuels during the COVID-19 pandemic.

It was the first annual decline since 2018, when capacity fell by 18,530 bpd and the largest since 2012, according to Energy Information Administration (EIA) data. That year capacity shrank 414,192 bpd following the Great Recession.

U.S. refiners last year suffered deep financial losses and closed five facilities as the pandemic slashed fuel sales. Average U.S. gasoline consumption fell 13% last year with gasoline and diesel prices hitting a four-year low, according to government figures.

Five refineries, with a combined capacity of 801,146 bpd, permanently shut following the 1.3 million-bpd drop in gasoline consumption as businesses closed and consumers stayed home. The closings drove capacity down to a level below 2016's 18.3 million bpd.

John Auers, executive vice president with Turner, Mason & Co, said the drop in capacity was expected.

"The global lockdowns and associated demand destruction led to the shutdown of refineries that were probably going to shut down eventually," Auers said.

The nation’s largest crude oil refiner Marathon Petroleum (MPC.N) shut three refineries while energy major Shell (RDSa.L) and independent refiner HollyFrontier (HFC.N) each shut one in 2020.

Marathon converted one refinery to a renewable diesel plant and is converting another to produce renewable diesel. HollyFrontier also plans to convert its idled refinery into a renewable diesel producer.

The fire-ravaged Philadelphia Energy Systems refinery was sold last year to a developer who plans to demolish it.

In May, the 200,000-bpd Limetree Bay refinery in St. Croix, U.S. Virgin Islands, shut under orders from the U.S. Environmental Protection Agency. On Monday, owner Limetree Bay Energy said the plant would not restart. read more The EIA does not count Limetree Bay in U.S. refining capacity.

Reporting by Erwin Seba; Editing by David Gregorio

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