Pinnacle, a reliability data analytics company, released on June 16 its “Economics of Reliability” report for the refining industry. The report analyzes the impact that reliability has on the refining industry.
“U.S. refiners are reporting record profits and are also running at well above average utilization levels,” said Jeff Krimmel, Chief Strategy Officer at Pinnacle. “This breakneck pace of activity puts real strain on U.S. refining assets. There are important political and economic constraints that will prevent meaningful capacity addition in the United State. As a result, domestic refiners have even more incentive to operate as efficiently and reliably as possible.”
The report leverages data from the U.S. Energy Information Administration (EIA) and from financial reports of 19 global refiners, including ExxonMobil, Shell, and Chevron. Pinnacle analysts estimate that these companies, who are primarily based in the United States, spent 2 percent of their downstream revenue on reliability and operated at an average utilization rate of 85 percent in 2021. As global demand for petroleum products skyrocketed, U.S. refiners expanded their utilization to account for the increase in demand. As of June 2022, U.S. refiners are achieving near 95 percent utilization, a level that has only been exceeded about 10 percent of the time since 2001.
“Based on our analysis of these downstream operators, we observed that top performers typically achieve higher utilization while strategically targeting their reliability spending,” said Jace Thurman, Market and Data Analyst at Pinnacle. “Reliable operations and assets are imperative to maximizing utilization and capturing high profit margins. These top performers likely employ data-driven reliability programs that identify the most effective use of their capital. While current market conditions have translated to better earnings for downstream operators, optimizing reliability programs and spending will become a critical strategy for refiners to protect increased profit margins.”
For more information or to read the full report, visit pinnaclereliability.com.