September 15, 2010

Refining Margins Under Pressure For Years To Come

That is how Sunoco CEO Lynn Elsenhans see it.

Sunoco Inc. Chief Executive Lynn Elsenhans said Wednesday that refining margins in the U.S. are expected to remain depressed for years as biofuels make up a bigger part of the transportation-fuel supply.

Expectations for a recovery in fuel demand have faltered across the refining industry as the year progressed. The summer driving season, when demand for gasoline typically peaks, was lackluster. The high unemployment rate and growing concerns about the U.S. economy entering a double-dip recession kept drivers off the road. For producers of petroleum-based fuel, the slow pace of the recovery in demand is compounded by increased blending of ethanol in gasoline due to federal mandates. U.S. environmental regulators are also considering whether to increase the ethanol blend to 15% from 10%.

The U.S. refining industry "will continue to be challenging with downward pressure on margins" for several years, Elsenhans said during the Barclays Capital energy conference Wednesday afternoon. "I see most of the gasoline demand growth taken up by biofuels."

Source : Dow Jones Newswires

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