Environmental pressure and questions over long-term demand are prompting global energy companies, financiers and governments to edge away from fossil fuel investments, curbing the world’s oil processing capacity. And yet, today, appetite for everything from jet fuel to gasoline continues to grow apace, particularly in the world’s large emerging economies.
Oil demand growth has outpaced the increase in refinery capacity since 2021, and this will continue through 2027, according to industry consultant FGE. After 2028, there are no confirmed new refinery projects, it said, though there will likely be projects undertaken in Asia and the Middle East.Of course, as the global vehicle fleet electrifies and oil consumption for transport eases, that supply-demand gap will close — but it will not do so fast and that leaves ample room for trouble.
With refining seen as especially environmentally unfriendly, Europe and the US have been phasing out older plants, along with Australia, Japan, and New Zealand. Global majors have cut smaller operations. Refining investment has instead been led by Asia, the Middle East, Africa and Latin America, with massive refineries such as Pemex’s Olmeca and Nigeria’s Dangote, owned by Africa’s richest man, Aliko Dangote.
“Nobody’s really adding capacity. Everyone is getting rid of it, in order to build chemicals or new materials.”