Daijiworld Media Network - Washington
Washington, Jul 26: US oil refiners are operating at near-record capacity to capitalise on strong profit margins, raising concerns that prolonged high utilisation could increase the risk of equipment failures and further tighten already strained global fuel supplies.
According to government data, refineries across the United States have been operating at or above 95 per cent capacity for nearly two months, a level widely regarded as full operational capacity. In the Rocky Mountain region, utilisation has reportedly exceeded 100 per cent on two occasions in recent weeks, highlighting the intense pressure on refining infrastructure.
Industry experts warn that sustained operations at such high levels accelerate wear and tear on equipment used to process crude oil into gasoline, diesel, jet fuel and other petroleum products. Any unexpected disruption, such as hurricanes, power outages or mechanical failures, could significantly reduce fuel production and trigger price spikes.
Analysts at Rapidan Energy said operating close to maximum capacity increases the likelihood of equipment failures, which could tighten fuel supplies and amplify price volatility at a time when global energy markets are already under pressure.
The American Fuel & Petrochemical Manufacturers (AFPM) has also cautioned that refineries are not designed to operate at 100 per cent capacity for prolonged periods, citing safety and operational concerns.
The risks were highlighted during the 2024 Atlantic hurricane season, when Hurricane Beryl forced Gulf Coast refiners to reduce crude processing by more than 500,000 barrels per day. Production remained below normal for several weeks before Hurricane Francine caused another round of disruptions along the Louisiana coast.
Although this year's Atlantic hurricane season has been relatively quiet, the US National Hurricane Center is monitoring a weather system in the eastern Gulf of Mexico with the potential to develop further, raising concerns about possible disruptions to refining operations.
To maximise profits from elevated refining margins, several companies have reportedly postponed scheduled maintenance. Motiva Enterprises, for instance, is said to have delayed a major turnaround at its Port Arthur refinery in Texas until 2027 to keep production online.
Analysts noted that any major refinery outage could have a disproportionate impact as US fuel inventories remain unusually low. Diesel supplies have been strained by strong international demand, while gasoline imports have fallen to their lowest seasonal level in nearly three decades.
Despite the operational risks, investors continue to back the refining sector, with shares of major companies such as Valero Energy, Phillips 66 and Marathon Petroleum recently reaching record highs.
Industry analysts expect refiners to continue operating at elevated rates into next year as strong profit margins and limited scheduled maintenance encourage maximum production.