Why Are Refineries Closed?

Why Are Refineries Closed?

Freezing weather hampered fueling infrastructure in several ways, including shutting production, refining, and distribution. At a very basic level, refineries heat up crude oil until it vaporizes, then cool it down as liquid fuels. The winter storm impacted these operations in several ways:

  • Freezing cold weather can directly damage equipment involved in the refining process
  • A sharp 60% decrease in Permian natural gas production and associated rolling power outages limited refiners’ abilities to run critical systems and keep equipment heated
  • A reduction in available water, also caused by power outages, impacted refiners’ cooling abilities

There’s no off-switch at a refinery – taking production offline is a complex process, and the faster it’s done, the longer it takes to restart. Since refiners didn’t have much warning in shutting down, they now face a slow start-up process, which is explained well in this article. An apt analogy is putting your car in park when stopped (a planned shutdown), compared to parking your car when you’re going 15 mph (a cold shutdown). When you restart your car after a “cold shutdown,” there could be damage throughout the engine.

Refineries are now going through the process of inspection to see what equipment was damaged and fix different components. Systems must be brought up partially, tested, and paused to fix problems. Just like your water pipes at home, fuel pipes can burst in the cold, or remnants of fuel may have gelled into a hard substance that causes restart issues.

Market Condition Report - Disclaimer
The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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