Over the last ten years, the U.S. economy has grown steadily, at an average annual rate of 3.3 percent. This led to an increase in the demand for petroleum products (including gasoline, diesel fuel, home heating fuel, and jet fuel), which grew by 17 percent, or roughly 1.7 percent per year. During this period, U.S. refinery capacity expanded by only 7 percent. While there has been some expansion of existing refinery capacity, it has not kept pace with demand growth. In addition, no new refineries have been built in the U.S. since 1976. The number of operable U.S. refineries declined from 315 in 1981 to 155 in 2002. To help meet the shortfall between supply and demand, the operating rate of refineries has risen—from 86 percent of capacity to 93 percent. At peak levels of seasonal demand, utilization is over 95 percent. Even so, the U.S. is unable to meet its demand for petroleum products and is forced to import an ever-increasing share of petroleum products from abroad. Over the last ten years, gasoline imports increased from 3.5 percent to 9 percent of demand. In 2002, about 20 million barrels per day of petroleum products were supplied to U.S. consumers. The Energy Information Administration projects that the volume of petroleum products supplied in the year 2025 will be 29.2 million barrels per day, an increase of 47 percent over 2001.1

While consumption increases by 47 percent, EIA projects that refinery capacity will increase by only 18 percent. EIA also projects that imports will increase to make up for the U.S. refinery production shortfall.  There are a number of constraints that make it difficult to build new refineries or expand existing facilities. These constraints include complex permitting procedures, regulatory uncertainty, poor rates of return, outdated depreciation treatment of refinery assets, and large investments required to meet stringent environmental regulations, including air quality and leaner burning fuel standards.

U.S. reliance on imported refined petroleum products raises issues related to fuel unavailability, price fluctuations, environmental needs, and national security. For example:

• The U.S. refinery system currently supplies 15 different types of gasoline. These specialized blends were adopted to improve fuel quality and to reduce emissions at the lowest cost to consumers. Unfortunately, they have also complicated the production process and have limited the amount of imports because foreign refiners have little incentive to produce fuels solely for U.S. consumption.

• This proliferation of “boutique fuels” limits the flexibility in the distribution system by limiting the ability of refiners to ship gasoline to an area when the supply in that area is inadequate to meet consumer demand. This further compounds the problems arising from the lack of excess refinery capacity and increases the potential for supply disruptions and price spikes.

Source: Energy Information Administration, Annual Energy Outlook 2003, DOE/EIA-0383 (2003), January 2003.

Refineries in US Listing 

U.S. Refineries Operable Atmospheric Crude Oil Distillation Capacity
(Barrels per Calendar Day)