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Refinery Margins

The definition of refinery margins is the value of the products produced by a refinery minus the value of the crude oil used to produce these products. As you can imagine, with the daily fluctuating values of crude oil these days, it is making it extremely difficult for refiners to make a fixed percentage profit on each item produced. Some companies rely on a median average price percentage profit, and hope that in the end it would have evened out to the correct percentage they desire.

Towards the end of 2008, global refiners were hit heavily as refining margins dived to the lowest margins in memory. Normally, this would be sometimes expected, but then would soon gradually pick up. However, amongst all the top refining companies, all have announced that their refining margins have not recovered. The European refiners seem to have reported the worst effects for 2009, with the North American refiners having slightly better results. The Far Eastern refiners have enjoyed some more success than their western counterparts, but this too seems short lived.

As the global recession hits, and as the gasoline demand lowers, some companies fear the worst, as their margins shrink at an alarming rate. Many of these refiners are now looking for alternative fuels which might be cheaper to produce and therefore increase their profit margins again. Refiners now have the unpleasant task of reporting losses after so many decades of record profits for their shareholders. Some smaller refiners are now threatened with the possibility of being taken over by some of the bigger companies as they cannot afford to stay operating anymore without incurring huge losses and perhaps bankruptcy as well.

The refining margins of most products produced approximately ten years ago was nearly 150% of the price of crude oil, some refiners are now only reporting a refining margin of approximately 31%, while this may seem like a good profit, the major companies have huge operating costs to take into consideration, so it is small wonder that a lot of these refinery companies are worried for their future. Some of the people working in the refiners are worried that their company will no longer be able to cope with the high costs of refining and are predicting that many refinery companies will shut their doors.

Many question how many refinery companies will survive if they do not fight to adapt to other products that do not require crude oil.

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