By Nick Cunningham
A growing number of refineries around the world are either curtailing operations or shutting down entirely as the oil market collapses.
Oil prices have fallen precipitously to their lowest levels in nearly two decades. Typically, falling oil prices are a good thing for refiners because they buy crude oil on the cheap and process it into gasoline, jet fuel, and diesel, selling those products at higher prices. The end consumer also tends to consume more when fuel is less expensive. As a result, the profit margin for refiners tends to widen when crude oil becomes oversupplied.
But the world is in the midst of dual supply and demand shock — too much drilling has produced a substantial surplus, and the global coronavirus pandemic has led to a historic drop in consumption. Oil demand could fall by as much as 20 percent, according to the International Energy Agency, by far the largest decline in consumption ever recorded.
Consumption of jet fuel around the world has plunged by 75 percent. Average retail gasoline prices in the U.S. are dropping below $2 per gallon nationwide and have already fallen below $1 per gallon in some places. They will fall further still.
"If oil continues to sell at such a low price, some of those companies are going to have severe financial issues tr… https://t.co/hHNTRFJ7uc— KENS 5 (@KENS 5)1585594804.0
In fact, margins even fell into negative territory, meaning that the average refiner was losing money on every gallon of gasoline produced. Refiners now find themselves facing a painful financial squeeze.
"We're seeing gasoline cracks at negative margins. We're seeing jet cracks even worse," Brian Mandell, an executive with Phillips 66, said on a March 24 phone call with investors. "Cracks" refer to the difference between the cost of buying crude oil and selling the refined product, and it stands in as a reference point for a refiner's profit margin.
One of the main strategies that refiners use when a particular product is oversupplied is to alter their processing mix. Facing a glut of gasoline, refiners could switch their operations away from gasoline to a focus on diesel, where margins have not declined by nearly as much. "With strong price signals pushing refiners towards diesel production, they would have made immediate adjustments to tweak their refined product yields," RBN Energy, a consultancy, wrote in a report.
However, some refiners already switched over to diesel following tighter international sulfur regulations on maritime fuels that took effect at the start of this year, which placed a premium on low-sulfur diesel. Having already tapped that strategy, the ability to adjust away from gasoline production is "likely limited," RBN concluded.
Collapsing Demand Leads to Refinery Closures
There are around 3 billion people on some form of a lockdown around the world. In those circumstances, refiners have seen buyers vanish overnight.
"We're seeing even our Latin American customers asking us if they can back out of cargoes now, so we see that the demand destruction is starting to move toward Latin America," Brian Mandell, the Phillips 66 executive, told investors.
With no buyers, gasoline is set to pile up in storage. Refiners are looking at no other choice but to curtail or shut down operations.
Valero Energy, for instance, recently announced that it would limit output at six of its 12 U.S. refineries. ExxonMobil announced significant cuts to its refineries in Texas and Louisiana, citing the lack of sufficient storage capacity. Notably, Exxon said it would shut down its gasoline unit at its Baytown, Texas, complex, the company's largest such unit in the United States.
"The refiners are struggling mightily, due to the steep drop in demand," John Kilduff, a partner at Again Capital LLC, told Bloomberg. "The poor refining margins will push companies to reduce operating rates further."
The danger for some refineries is that they cannot simply throttle back and operate at really low levels. "In our experience, crude throughput in the 60 percent to 70 percent range is approaching the minimum rates that a refinery can operate without completely shutting down units," RBN said.
According to Phillips 66, even that threshold might be optimistic. "I don't think a good rule of thumb would be down in the 60 percent range for refiners. Most refineries can't turn down that far," Robert Herman, an executive with Phillips 66, said on an investor call. With refiners already lowering processing, "we're nearing kind of minimum crude rates in many of our refineries today," he added.
In other words, facing a mounting glut and no ability to lower output further, some refineries may simply need to shut down entirely.
We are now witnessing oil refiners not just cutting runs, but in some markets they are completely shutting down.… https://t.co/0ndZjNMUHE— Javier Blas (@Javier Blas)1585569542.0
In one particularly unusual move, India's Reliance Industries said it would simply sell the crude oil that it had in transit at sea, rather than allowing the cargo to arrive at its refineries. Reliance, which operates the world's largest refining complex, said it would instead cut processing rates. "As of now, the plan is to cut refining throughput in April because demand is not there," a source told Reuters.
In the U.S., refineries unable to switch away from gasoline are most at risk, as are those in the Midwest and the Rockies, where access to pipelines and storage capacity is a fraction of that on the Gulf Coast, according to RBN.
"It is not difficult to see run cuts of 10 mmb/d (million barrels per day) soon, perhaps peaking at 15-20 mmb/d at the height of the pandemic. This is likely to force some refineries to close down, while others will reduce rates severely," research firm FGE said in a report on March 30.
Running out of Storage, Oil Prices to Crash Further
The situation could unravel rather quickly. Consumers aren't consuming and refiners are lowering their operations. Ultimately, that means that oil drillers will have no place to sell their oil.
A number of pipeline companies have already asked oil drillers to cut back on their production because the pipeline system was becoming overwhelmed.
The estimated 20-million-barrel-per-day surplus will lead to storage filling up in the next two to three months. To avoid such an outcome, analysts widely see crude prices crashing even further.
"Demand for gasoline (no driving) and jet fuel (no flying) has now crashed and inventories for these products are already brimming. Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products," Bjarne Schieldrop, chief commodities analyst at SEB, a Swedish corporate bank, said in a statement. "For land-based or land-locked oil producers, this means only one thing: the local oil price or well-head price they receive very quickly goes to zero or even negative."
Reposted with permission from DeSmog.
- Trump Bails Out Oil Industry, Not U.S. Families, as Coronavirus ... ›
- Trump's Christmas Gift to Big Oil: Killing Hopes of Electric Car Tax ... ›
- BP to Cut 10,000 Jobs as Oil Demand Plummets - EcoWatch ›
- Extremely Rare Leopard Cubs Born in Connecticut Zoo - EcoWatch ›
- Small Wild Cats Face Big Threats Including Lack of Conservation ... ›
- 5 Species Bouncing Back From the Brink of Extinction - EcoWatch ›
EcoWatch Daily Newsletter
By Julia Conley
A new campaign unveiled this weekend by the nonprofit organization Fossil Free Media aims to expand on the goals of the fossil fuel divestment movement, cutting into oil and gas companies' profit margins through their public relations and ad campaigns.
<div id="1dcf1" class="rm-shortcode" data-rm-shortcode-id="d5e39a5a3812bc2589ba8aa0563756e0"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1330177734799208465" data-partner="rebelmouse"><div style="margin:1em 0">PR and ad companies' work for the fossil fuel industry is pushing the planet past the breaking point.… https://t.co/wOuDBM26ne</div> — Clean Creatives (@Clean Creatives)<a href="https://twitter.com/cleancreatives/statuses/1330177734799208465">1605974060.0</a></blockquote></div>
<div id="21b90" class="rm-shortcode" data-rm-shortcode-id="bdc23e69ff18075b4fb5df6d4939b9f5"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1330205383848288257" data-partner="rebelmouse"><div style="margin:1em 0">Porter Novelli isn't some small shop: they've got offices and clients in 60 countries and are part of @Omnicom, the… https://t.co/iw0BCmrdzx</div> — Jamie Henn (@Jamie Henn)<a href="https://twitter.com/jamieclimate/statuses/1330205383848288257">1605980652.0</a></blockquote></div><p>"It's a BIG deal that they're dropping fossil fuel clients—let's make sure it's the drop that starts a flood," wrote Henn. </p>
- Fossil Fuel Industry Is Now 'in the Death Knell Phase': CNBC's Jim ... ›
- Dozens of Faith Institutions Announce Divestment From Fossil Fuels ... ›
- All Renewables Will Be Cost Competitive With Fossil Fuels by 2020 ... ›
By Jason Farley
COVID-19 has disrupted our daily lives, and it is poised to completely disrupt the holiday season. As people make holiday plans and think about ways to reduce the risks to their loved ones, a strategy is essential.
Are masks really necessary at family gatherings?<p>If you're gathering with friends and family who don't live in your home, yes. Just because you're with people you know doesn't mean you're safe from the coronavirus. Infection rates are <a href="https://coronavirus.jhu.edu/data/new-cases-50-states" target="_blank" rel="noopener noreferrer">higher now than they have ever been</a> in the U.S., and <a href="https://youtu.be/ehdgceGzQxs" target="_blank" rel="noopener noreferrer">small gatherings have been a source</a> of viral spread. All it takes is one infected person who doesn't know they have the coronavirus to infect others.</p><p>Remember, people can be <a href="https://medical.mit.edu/covid-19-updates/2020/07/how-long-symptom-onset-person-contagious" target="_blank" rel="noopener noreferrer">contagious two to three days</a> before symptoms show – that's one thing that makes this virus so hard to stop. And it's why, even if you feel fine, you should wear a mask.</p><p>The Centers for Disease Control and Prevention now estimates that when both people are wearing masks, the <a href="https://www.cdc.gov/coronavirus/2019-ncov/more/masking-science-sars-cov2.html" target="_blank">likelihood of infection is low</a>.</p>
Who am I protecting when I wear a mask?<p>In a word: everyone. The coronavirus <a href="https://theconversation.com/aerosols-are-a-bigger-coronavirus-threat-than-who-guidelines-suggest-heres-what-you-need-to-know-142233" target="_blank">spreads through respiratory droplets</a> that you send out into the air when you talk, sing or even just breathe. The tiniest of these droplets can float on air currents for long periods.</p><p>Face masks stop many of those droplets, reducing the amount of virus in the air. That lowers your chances of getting infected, and it also lowers the chances that you'll infect someone else.</p><p><a href="https://www.cdc.gov/coronavirus/2019-ncov/more/masking-science-sars-cov2.html" target="_blank">Studies of people who had prolonged exposure</a> to others with COVID-19 have demonstrated how masks can reduce the chance of the virus spreading. In general, <a href="https://www.cdc.gov/coronavirus/2019-ncov/more/masking-science-sars-cov2.html" target="_blank" rel="noopener noreferrer">well-fitted cloth masks</a> made up of multiple layers can stop most large droplets and at least half of the tiny ones. Plastic <a href="https://doi.org/10.1101/2020.10.05.20207241" target="_blank" rel="noopener noreferrer">face shields</a> alone are far less effective. <a href="https://www.washingtonpost.com/health/2020/08/13/cdc-mask-guidance-masks-valves/" target="_blank" rel="noopener noreferrer">Face masks with valves or vents</a> might be good for construction work, but they don't stop the wearer from breathing out virus into the air.</p>
Can I reuse a mask and when should I replace it?<p>Reusable masks should be kept clean and dry. We're moving into cold and flu season, and noses get drippy. A rule of thumb: Anytime a mask is wet to the point that you can discern the wetness, it's time for a new one if it's disposable, or it's time to clean your reusable mask.</p><p>Wetness allows viruses to more easily move through paper or fabric because it allows the threads to move and may reduce the electrostatic charge in the masks that add extra protection with some fabrics.</p><p>In general, you can use a mask that stays clean and dry for about a week before you need to wash or discard it.</p>
How should I clean a cloth mask?<p>Washing your mask is like washing your clothes. You know when it is time.</p><p>In general, <a href="https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/how-to-wash-cloth-face-coverings.html" target="_blank">cleaning your mask weekly</a> should be sufficient. If odors develop before then, it's a good idea to wash it sooner. Odor generally means bacterial buildup.</p><p>Cleaning your mask by hand with soap and water is your best option. Using a general detergent on a gentle cycle in the washing machine is also fine, but that may increase the risk of damage, depending on the quality of the material. COVID-19 is not a hardy virus. Any soap or detergent should work fine. There's no need for special chemicals, bleach or harsh soaps.</p><p>Be careful to remove any inserts before washing. Inserted filters are generally not washable.</p><p>Air drying masks works best. Remember, masks should be completely dry before use. So be sure to have a replacement mask handy while the one you just washed dries.</p><p>Sunlight is always a great source of heat to dry your mask. Also, sunlight has ultraviolet radiation, which has been shown to <a href="http://doi.org/10.1111/php.13293" target="_blank" rel="noopener noreferrer">eliminate coronavirus</a> and is also known to have antibacterial properties.</p>
Can I wear the mask below my nose?<p>Wearing your mask below your nose is, frankly, ridiculous.</p><p>Think about it. If you are breathing through your nose and only covering your mouth, you are effectively eliminating the point of the mask. Properly wearing a mask requires covering both your nose and mouth at all times.</p><p>Studies show that wearing a proper cloth mask or surgical mask while exercising <a href="http://doi.org/10.1513/AnnalsATS.202008-990CME" target="_blank">doesn't affect the flow of oxygen</a> or carbon dioxide in any detectable way. So, unless you have serious heart and lung problems, that isn't an excuse.</p>
How do I safely remove my mask if I’m going to eat or drink?<p>When you <a href="https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/how-to-wash-cloth-face-coverings.html" target="_blank">take your mask off</a>, remove it carefully by the straps without touching anything else and put it somewhere safe, like wrapped in paper in a purse, bag or pocket. Then wash your hands or use hand sanitizer. When you put it back on, wash your hands again.</p>
So, how can I have a safe holiday gathering?<p>The safest way to celebrate this year is to do so with members only within your household. The <a href="https://www.cdc.gov/coronavirus/2019-ncov/daily-life-coping/holidays.html" target="_blank" rel="noopener noreferrer">CDC is now stressing that point</a>, as well. If you do celebrate with friends and relatives from outside your household, you need an action plan to reduce the risk of exposure.</p><p>Here are five recommendations:</p><ul><li>Limit the number of people – fewer people means fewer opportunities for exposure, and you'll have more room to spread out.</li><li>Require masks when not eating or drinking.</li><li>Use physical distancing when eating. Try to seat people <a href="https://doi.org/10.1136/bmj.m3223" target="_blank" rel="noopener noreferrer">at least 6 feet apart</a>. Eat outside if you can.</li><li>Consider being tested for COVID-19 before traveling or gathering. It's not a guarantee, but it can help flag illnesses. Remember to self-isolate between the test and the event.</li><li>Be prepared to self-isolate for 14 days after traveling or participating in any event that involves people from outside your home.</li></ul><p>[<em>Research into coronavirus and other news from science</em> <a href="https://theconversation.com/us/newsletters/science-editors-picks-71/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=science-corona-research" target="_blank" rel="noopener noreferrer">Subscribe to The Conversation's new science newsletter</a>.]</p><p><em>The map has been updated with New Hampshire announcing a mask mandate effective Nov. 20.</em></p><p><em>Jason Farley is a professor, infectious disease-trained epidemiologist and nurse practitioner at the Johns Hopkins University School of Nursing.<br></em></p><p><em>Disclosure statement: Jason Farley, PhD, MPH, ANP-BC, FAAN receives funding from the National Institutes of Health on the Rapid Acceleration of Diagnostics for COVID-19 and Becton Dickinson for studies on SARS-CoV-2 diagnostics.</em></p><p><em>Reposted with permission from <a href="https://theconversation.com/why-face-masks-belong-at-your-thanksgiving-gathering-7-things-you-need-to-know-about-wearing-them-150130" target="_blank">The Conversation</a>. </em></p>
- Does laundry need to be treated differently and disinfected ... ›
- Reusable Cups, Bags and Containers Can Be Safe During COVID ... ›
- How to Host a Safe Holiday Meal During Coronavirus – an ... ›
Despite being a well-known port of call on the Caribbean cruise circuit, the City of Key West voted to ban large cruise ships from visiting and to restrict foot traffic from vessels. Supporters and opponents disagreed about the safety, environmental and economic merits of the proposals.
- Leading Cruise Lines Face Lawsuits Following Handling of COVID ... ›
- Thousands of Ships Use 'Cheat Devices' to Dump Toxic Wastewater ... ›
- Environmental Report Card Grades Cruise Ships - EcoWatch ›
- Coral Rescue Team Races to Save Endangered Corals From ... ›