MESSAGE FROM THE MONTANA PETROLEUM ASSOCIATION EXECUTIVE DIRECTOR
Alan Olson
THE PETROLEUM INDUSTRY TODAY is certainly different than it was only two short years ago in 2020. On the production side, Montana crude oil pricing has gone from a negative $43.92 per barrel on April 20, 2020, to $97.62 one year later. As of the writing of this piece on June 10, the price is standing at $115.52. Immediately following the crash in 2020, three of Montana’s biggest oil producers filed for bankruptcy and reorganized through their creditors. Numerous oilfield service companies went out of business
and thousands of jobs were lost. Even today we have not seen production numbers witnessed at the peak in January of 2020 when the U.S. was producing 12.9 million barrels per day. As we recover from the production losses in 2020 and 2021, we are still producing one million fewer barrels per day than at the peak. 2020 was also a devastating year for refiners nationwide as historical overcapacity was accompanied by a drop in global fuel demand, slashing margins and forcing many already struggling refineries into
Petroleum Industry Engineers & Consultants REN GARDNER President / Engineer
COREY WELTER Vice President
P.O. Box 1582, Billings, MT 59103
406-259-4878
www.welterconsulting.com 6 The Treasure State Journal® 2022
early retirement. In 2020, 28 refineries were closed. An analysis showed that permanent capacity reductions in 2020 surpassed 1.0 million barrels per day (bpd) in the United States, while more closures may materialize given the additional idled refining capacity of approximately 408,000 bpd awaits a final decision. As an example, a Texas petroleum refinery operated by LyondellBasell Industries, built in 1918, is scheduled to permanently close by the end of 2023 but could shut down earlier if a “major equipment failure” spreads to major units as reported by Reuters. This refinery processes 268,000 bpd of oil and produces 92,600 bpd of diesel fuel, 89,000 bpd of gasoline, and 44,500 bpd of jet fuel. An untimely shutdown of this refinery will add additional pressure on domestic fuel supplies. Global refining, which is vital for producing fuels like gasoline and diesel decreased refinery through-put by 1.4 million bpd between 2019 and the first quarter of 2022, according to the International Energy Agency. Data shows most of the refinery closures occurred in western countries. However Chinese refining capacity is expected to see substantial growth over the next few years but very little of that growth will be available for export. Across the board, the continued decline in domestic and international refining capacity could signal long-term domestic fuel supply shortfalls. Diesel fuel supplies have hit all-time lows on the east coast and gasoline prices have surged to multiple records in recent weeks. Currently distil-
