Competitiveness of Energy-Intensive Industries in Europe: The Crisis of the Oil Refining Sector between 2008 and 2013

After the so-called 'golden age' of refining between the years 2005 and 2008, total or partial closures of 13 EU oil refineries from 2009 to 2013 reduced the EU's total refining capacity by about 10%. This paper analyses the drivers behind this crisis, using industry data on performance and cost structure collected at the refinery level and covering the years 2000 to 2012. During this period EU refiners lost ground in terms of net margins, which fell from above to below the average of their non-EU competitors. Our results show that up to 90% of this loss was driven by refineries' energy costs, which grew almost twice as much in Europe than in other global refining regions. Further analysis indicates that this was not the result of increased energy intensity but of increasing unit energy costs. The remaining 10% of the total competitiveness loss can be explained by the relative worsening of EU refineries' utilization rates, reflecting the decline in demand for oil products-in particular gasoline-that occurred in the EU. Environmental and energy policies have likely contributed to this demand side effect, but its competitiveness impact remains of minor importance compared to the energy cost surge.