Energy companies are reaping banner profits by taking cheap oil landlocked in North America and turning it into fuel, The Wall Street Journal reports, making U.S. refining a key driver of oil profits.
Tremendous growth in oil output has overwhelmed pipelines and depressed crude prices in some regions of Texas and Canada. For example, near Canada, crude is trading for $43 a barrel below U.S. benchmark prices. This is highly lucrative for companies with nearby refineries in Canada or the upper Midwest that can convert crude into gasoline and diesel.
This is not especially great news for parts of south Louisiana, including Lafayette, where economic health is dependent upon offshore drilling. Gas and plastics are seeing increasing importance for plants along the 10/12 corridor.
Take Phillips 66, which says it is the largest industry buyer of heavy Canadian crude. The company operated its nearby refineries at 108% capacity during the third quarter, earning an average $23.61 a barrel processed there. That lifted quarterly profits to nearly $1.5 billion, an 81% increase from the same period last year.
“U.S. refining has really gone from being a dog to being a fairly attractive business model,” John Auers, an executive vice president at consultancy Turner, Mason & Co., tells WSJ. “I don’t think that’s going to change any time soon.”
