Crude Summit: Oil refining holds long future

US refiners will expand into both new geographies and commodities in a flattening demand environment for liquid fuels, refining experts said today.

Alternate fuels such as renewables or electric vehicles do not pose an imminent threat to liquid fuel market share in the current price environment, Phillips 66 chief analyst Horace Hobbs and Parr Petroleum chief executive Joseph Israel said at the Argus Americas Crude Summit in Houston, Texas. Crude prices were too low to spur a more aggressive push into alternatives, Israel said, while Hobbs noted that refiners have produced profits even in years without demand growth.

But refiners must adapt to, not fight, changing preferences for energy, they said. Phillips 66 had invested in production that could be used for car batteries and for photovoltaics.

"So if folks do not want gasoline in the future, then we are going to have to find a way to respond to that, and supply the things that we can supply that there is real demand for," Hobbs said.

Refiners also hold much of the infrastructure needed to distribute whatever future liquid fuels begin to emerge, Israel said.

"We have the tanks, we have the docks, we have the infrastructure to carry the next generation into the future of energy," Israel said. "It is all about being a part of it, and positioning the company to be a part of tomorrow's business."

Growing global oil production meant that energy prices were becoming less cyclical based on feedstock supply, said Dean Foreman, chief economist for oil industry trade group API. New cycles would instead shift to demand and market share. Oil retained a commanding price advantage compared to alternative fuels, especially in growing markets, he said.

So the refiners did not anticipate new interest in non-petroleum fuels to directly lead to shutdowns in the US or abroad.

"We are not going out of business," Hobbs said. "We might be changing our markets, we might be changing the level of efficiency, might be offering a broader array of specific products to specific markets, but there is still a huge need for the types of things that we do."

By Elliott Blackburn