Wood Mackenzie analysts estimate that 101 of the world’s 410 refineries are at risk of shutting down in the next decade, making up 21% of global refining capacity.
This is driven by factors such as peak oil demand, which will lower refinery output, and high operational costs, particularly in Europe, where carbon taxes affect the energy sector.
Refineries that lack investments in low-carbon technologies are especially vulnerable.
“Refineries without committed investments in low-carbon technologies, such as carbon capture, energy efficiency upgrades, or alternative fuels, are especially exposed,” the analysts noted.
Refineries in regions with high or escalating carbon pricing, including the European Union, UK, and Canada, face the greatest pressure.
“Those located in regions with established or escalating carbon pricing costs, including the European Union, UK, and Canada, are under the greatest pressure,” the report stated.
Carbon prices in these regions are predicted to rise to three times the global average by 2035, which could make it economically unfeasible for some refineries in the EU, UK, and Canada to remain operational unless policies change.
China’s focus on electrification and LNG-powered trucks is also reducing oil demand, with data showing this impact.
Refineries and petrochemical plants are likely to survive better as plastics demand remains strong despite climate policies. Fuel demand, however, is expected to decline.
If closures happen, fuel shortages could arise, especially in Europe and Canada. The U.S. Energy Information Administration has warned that fuel shortages may occur if refining capacity continues to shrink.
Additionally, eight OPEC+ nations have decided to increase oil output by 411,000 barrels per day (bpd) in May, exceeding the planned 135,000 bpd. OPEC stated, “This comprises the increment originally planned for May in addition to two monthly increments.” The increase may be adjusted based on market conditions.
This move is part of a plan to gradually reverse a 2.2 million bpd output cut. OPEC+ also maintains 3.65 million bpd of other cuts until next year to stabilize the market. The total of 5.85 million bpd represents approximately 5.7% of global oil supply.
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