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The impact of outages on prices and investment in the U.S. oil refining industry

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  • Chesnes, Matthew

Abstract

This paper considers the effects of refinery outages (due to planned turn-arounds or unplanned events) on current petroleum product prices and future refinery investment. Empirical evidence on these relationships is mixed and highly dependent on the size and duration of the outage, the geographic area considered, the level of inventories available at the time of the outage, and the tightness of the market as measured by the capacity utilization rate. Using a detailed database of plant-level refinery outages for both upstream and downstream refining units, I estimate the effects of outages on product prices controlling for the crude oil price and the ability of operating plants to respond to the outage. I also consider the effect of current market profitability on the likelihood of planned refinery outages and the effects of high utilization rates and planned maintenance on the prospects for unplanned outages. I then use plant-level capacity data to analyze the effects of outages, profitability, and utilization rates on future investment decisions of the refinery.

Suggested Citation

  • Chesnes, Matthew, 2015. "The impact of outages on prices and investment in the U.S. oil refining industry," Energy Economics, Elsevier, vol. 50(C), pages 324-336.
    • Handle: RePEc:eee:eneeco:v:50:y:2015:i:c:p:324-336
    DOI: 10.1016/j.eneco.2015.05.008
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    References listed on IDEAS

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    Cited by:

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    2. Bin Li & Mohan Venkatachalam, 2022. "Leveraging Big Data to Study Information Dissemination of Material Firm Events," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 60(2), pages 565-606, May.
    3. Wu, Xi & Wang, Yudong, 2021. "How does corporate investment react to oil prices changes? Evidence from China," Energy Economics, Elsevier, vol. 97(C).
    4. Sweeney, Richard L., 2023. "Environmental Regulation, Imperfect Competition, and Market Spillovers: The Impact of the 1990 Clean Air Act Amendments on the US Oil Refining Industry," RFF Working Paper Series 23-19, Resources for the Future.
    5. Ederington, Louis H. & Fernando, Chitru S. & Hoelscher, Seth A. & Lee, Thomas K. & Linn, Scott C., 2019. "Characteristics of petroleum product prices: A survey," Journal of Commodity Markets, Elsevier, vol. 14(C), pages 1-15.
    6. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.

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    Keywords

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    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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