EIA projects refining margins to hold steady despite capacity cuts
The U.S. Energy Information Administration (EIA) has released its November 2024 Short-Term Energy Outlook, forecasting that U.S. refinery capacity will decline to 17.9 million barrels per day (bpd) by the end of 2025, marking a 3% reduction from the beginning of 2024. Despite this decrease, refining margins—known as crack spreads—for gasoline and diesel fuel are expected to remain relatively stable in 2025.
Joe DeCarolis, EIA administrator, said, “Crack spreads have been declining steadily since 2022, and we expect them to hold steady next year, even with the decrease in refining capacity.”
The reduction in refining capacity follows announcements from major operators, including LyondellBasell Industries, which plans to close its Houston Refinery in early 2025, removing 264,000 bpd of capacity. Additionally, Phillips 66 will cease operations at its Los Angeles refinery by the end of 2025, reducing capacity by another 138,700 bpd.
The report offers some optimism for consumers, with lower crack spreads contributing to decreased fuel prices. U.S. gasoline prices are projected to average USD3.20 per gallon, while diesel prices are forecasted at USD3.60 per gallon in 2025.
Additional Highlights:
- Brent Crude Oil Prices: Expected to average USD76 per barrel in 2025, with inventory growth anticipated by Q2 2025 due to increased global production.
- Distillate Fuels Consumption: U.S. demand for distillate fuels is forecasted to grow by 4% in 2025, driven by manufacturing and trucking demand.
- Global Liquid Fuels Demand: Consumption is expected to reach a record 104.4 million bpd in 2025, with significant growth in Asia, particularly India.
- Winter Fuels: No major changes in household heating fuel expenditure forecasts despite warmer-than-normal early winter conditions.
The full report is available on the EIA’s official website.
