Google Play icon

Refiner margins unable to fully offset low upstream earnings for integrated oil companies

Share
Posted June 18, 2015

First-quarter 2015 financial results for globally integrated oil companies—ones that focus on both the exploration and production of crude oil (upstream) and the refining of crude oil into petroleum products (downstream)—show that total earnings were $22 billion (54%) lower than in first-quarter 2014. Lower crude oil prices contributed to a decline in profits in the upstream sector of $28 billion (80%) compared to first-quarter 2014. Profits in the downstream sector, however, were the largest for any quarter since third-quarter 2012, almost $6 billion (95%) higher than in first-quarter 2014, which offset some of the decline from the upstream segment.

Image credit: U.S. Energy Information Administration

Image credit: U.S. Energy Information Administration

Crack spreads refer to the differences between wholesale petroleum product prices and crude oil prices, and they can serve as an indicator of refining profits. Crack spreads for gasoline and heating oil (based on futures prices for North Sea Brent crude oil and gasoline and heating oil in New York Harbor) averaged 28¢ per gallon (gal) and 49¢/gal, respectively, in the first quarter of 2015. These crack spreads represent year-over-year increases of 7¢/gal for gasoline and 4¢/gal for heating oil.

First-quarter earnings statements from 11 global companies show that the high crack spreads during this time contributed to higher profits in the downstream segment. Even though absolute prices for both crude oil and petroleum products declined in first-quarter 2015 compared to first-quarter 2014, North Sea Brent crude oil prices fell more than wholesale gasoline and heating oil prices, resulting in an increase in the margin from refining crude oil.

Image credit: U.S. Energy Information Administration

Image credit: U.S. Energy Information Administration

The combination of lower upstream earnings and higher downstream earnings led to downstream earnings accounting for 63% of combined earnings in the first quarter, compared to a 15% average downstream share from 2011 through 2014.

Source: EIA

Featured news from related categories:

Technology Org App
Google Play icon
83,289 science & technology articles

Most Popular Articles

  1. Bright Fireball Explodes Over Ontario, Meteorite Fragments Might Have Reached the Ground (August 5, 2019)
  2. Why older people smell the way they do? Japanese have even a special word for it (August 4, 2019)
  3. Terraforming the Surface of Mars with Silica Aerogel? (July 23, 2019)
  4. Swarm Autonomy Tested in Second Major DARPA OFFSET Field Experiment (August 8, 2019)
  5. Dark Matter may Predate even the Big Bang Itself, New Study Suggest (August 8, 2019)

Follow us

Facebook   Twitter   Pinterest   Tumblr   RSS   Newsletter via Email