Ward's Business Directory of U.S. Private and Public Companies, produced by Gale Research Inc., compiles financial data on U.S. companies including those operating within the petroleum refining industry. Ward's ranks U.S. companies, whether they are a parent company, subsidiary or division, by sales volume within the 4-digit SIC codes that they have been assigned as their primary activity. Readers should note that: 1) companies are assigned a 4digit SIC that most closely resembles their principal industry; and 2) sales figures include total company sales, including sales derived from subsidiaries and operations not related to petroleum refining. Additional sources of company specific financial information include Standard & Poor's Stock Report Services, Dun & Bradstreet's Million Dollar Directory, Moody's Manuals, and annual reports. Note: "When Ward's Business Directory listed both a parent and subsidiary in the top ten, Source: Ward's Business Directory of U.S. Private and Public Companies - 1993. II.B.3. Economic Trends The United States is a net importer of crude oil and petroleum products. In 1994, imports accounted for more than 50 percent of the crude oil used in the U.S. and about 10 percent of finished petroleum products. 12 The imported share of crude oil is expected to increase as U.S. demand for petroleum products increases and the domestic production of crude oil declines. Imported finished petroleum products serve specific market niches arising from logistical considerations, regional shortages, and long-term trade relations between suppliers and refiners. Exports of refined petroleum products, which primarily consist of petroleum coke, residual fuel oil, and distillate fuel oil, account for about four percent of the U.S. refinery output. Exports of crude oil produced in the U.S. account for about one percent of the total U.S. crude oil produced and imported.13 The petroleum refining industry in the U.S. has felt considerable economic pressures in the past decade arising from a number of factors including: increased costs of labor; compliance with new safety and environmental regulations; and the elimination of government subsidies through the Crude Oil Entitlements Program which had encouraged smaller refineries to add capacity throughout the 1970s.14 A rationalization period began after crude oil pricing and entitlements were decontrolled in early 1981. The market determined that there was surplus capacity and the margins dropped to encourage the closure of the least efficient capacity. Reflecting these pressures, numerous facilities have closed in recent years.15 Between 1982 and 1994, the number of U.S. refineries as determined by the Department of Energy dropped from 301 to 176. Most of these closures have involved small facilities refining less than 50,000 barrels of crude oil per day. Some larger facilities, however, have also closed in response to economic pressures. Industry representatives cited complying with the increasing environmental regulations, particularly, the requirements of the Clean Air Act Amendments of 1990, as the most important factor affecting petroleum refining in the 1990s." Despite the closing of refineries in recent years, total refinery output of finished products has remained relatively steady with slight increases in the past two years. Increases in refinery outputs are attributable to higher utilization rates of refinery capacity, and to incremental additions to the refining capacity at existing facilities as opposed to construction of new refineries.18 16 Demand for refined petroleum products is expected to increase slowly through 1998 with the growth of the U.S. economy. The rate of increase will average about 1.5 percent per year, which is slower than the expected growth of the economy. This slower rate of increase of demand will be due to increasing prices of petroleum products as a result of conservation, the development of substitutes for petroleum products, and rising costs of compliance with environmental and safety requirements. 19 Recent and future environmental and safety regulatory changes are expected to force the petroleum refining industry to make substantial investments in upgrading certain refinery processes to reduce emissions and alter product compositions. For example, industry estimates of the capital costs to comply with the 1990 Clean Air Act Amendments, which mandates specific product compositions are about $35 to $40 billion.20 There is concern that in some cases it may be more economical for some refineries to close down partially or entirely rather than upgrade facilities to meet the new standards. In fact, the U.S. Departments of Energy and Commerce expect refinery shutdowns to continue through the 1990s; however, total crude oil distillation capacity is expected to remain relatively stable as a result of increased capacity and utilization rates at existing facilities. Increases in demand for finished petroleum products will be filled by increased imports. |