U.S. refinery capacity to fall nearly 3% by end of 2025

Declines in U.S. refinery capacity are expected to slow the decrease in refining margins. Refinery margins or crack spreads, the difference between the selling price and the cost of production for gasoline and diesel, are expected to be flat in 2025.

On Wednesday (Nov. 13), the U.S. Energy Information Administration (EIA) released the November Short-Term Energy Outlook that shows U.S. refinery capacity is expected to decrease by about 3% to 17.9 million barrels per day at the end of 2025 from the start of 2024.

“Crack spreads have been declining steadily since 2022, and we expect them to hold steady next year, even with the decrease in refining capacity,” said EIA Administrator Joe DeCarolis.

LyondellBasel Industries plans to close its Houston Refinery in the first quarter of 2025, removing nearly 264,000 barrels per day of domestic refining capacity. Phillips 66 plans to cease operations at its Los Angeles refinery in the fourth quarter of 2025, removing an additional 138,700 barrels per day of U.S. refining capacity.

“The good news from a consumer perspective is that lower crack spreads have resulted in reduced gasoline and diesel prices at the pump,” DeCarolis said.

In 2025, U.S. gasoline prices are projected to average about $3.20 per gallon and diesel to average about $3.60 per gallon.

Following are other highlights from the Short-Term Energy Outlook:
• International benchmark Brent crude oil spot price is expected to average about $76 per barrel in 2025. Global oil inventories are projected to increase in the second quarter of 2025, following five quarters of declines, as increased production from OPEC+ and other regions result in global oil production outpacing demand.

• U.S. distillate fuels consumption is projected to rise by about 4% in 2025, primarily because of growth in domestic manufacturing activity and increased demand from truckers that ship goods.

• Global liquid fuels demand is expected to rise by about 1 million barrels per day by the end of 2024 and increase by 1.2 million barrels per day by the end of 2025. Global liquid fuels consumption is projected to average a record 104.4 million barrels per day in 2025. However, the average consumption growth rate for each year is less than the average rate over the past 10 years. Most liquid fuels consumption growth is in Asia, especially India. EIA expects India to increase its liquid fuels consumption by about 300,000 barrels per day in 2024 and 2025, driven by rising demand for transportation fuels.

• The average household heating fuel expenses for this winter were updated recently after a warmer-than-normal start to the season. EIA expects “negligible changes” from its previous projections for the average household consumption and total expenses for heating fuels this winter.