Out of 410 oil refineries worldwide, 101 may shut down within the next decade, according to analysts at Wood Mackenzie. That’s 21% of global refining capacity. The likely reasons include falling oil demand and rising running costs especially in regions like Europe, where carbon taxes are high.
High costs and carbon rules key concerns
Wood Mackenzie warns that the high costs of running refineries, especially with new climate rules, could push many to close. Refineries without plans to go green such as using carbon capture or switching to cleaner fuels are the most vulnerable. Those in places with strict climate taxes, like the EU, UK, and Canada, are under extra pressure. These carbon costs are expected to triple by 2035, making many refineries too expensive to keep open.
China’s clean energy push affects demand
China’s growing use of electric vehicles and LNG powered trucks is also cutting into oil demand. This shift could hurt refineries even more, especially those that rely mostly on fuel production.
Petrochemical plants have better chances
Not all refineries are equally at risk. Plants that make petrochemicals used in plastics and other products are more likely to survive. This is because demand for plastics remains strong, even with climate policies in place.
Possible fuel shortages if closures continue
If the predicted closures happen, fuel shortages could become a real issue, especially in places like Europe and Canada. The U.S. Energy Information Administration has already warned about this risk in its latest report.
OPEC+ to boost oil output in May
Meanwhile, eight countries in the OPEC+ group have agreed to increase oil production by 411,000 barrels per day starting in May. This is more than their earlier plan of 135,000 bpd. The surprise decision came after a Thursday meeting and is meant to take advantage of what OPEC+ sees as a strong market outlook.
Oil prices take a hit
Oil prices fell sharply after the news. Brent crude dropped more than 6%, falling below $70 per barrel. This came on top of a 4% drop earlier in the week after U.S. President Donald Trump announced new tariffs on trade partners.
Output cuts still in place
Despite the increase, OPEC+ still has major production cuts in place totalling 5.85 million barrels per day, or about 5.7% of global supply. These are expected to remain through next year to help balance the market.
