Oil Refining/Marketing

The Oil Refining and Marketing (R&M) industry transforms crude oil into usable petroleum products and distributes them to consumers. It involves purchasing crude oil, refining it into products like gasoline and jet fuel, and marketing these products through wholesale and retail channels. Refining is a global commodity business, while marketing is more regional and provides a more stable income stream.

The Oil Refining/Marketing industry's performance is driven by global demand for refined products, which is tied to economic growth and population increases. Technological advancements like digitalization and AI are optimizing operations. Integration with petrochemical production offers a hedge against weakening fuel demand. The industry is adapting to the energy transition by exploring alternative fuels and low-carbon technologies. Regulatory changes, especially environmental regulations, significantly impact the industry by increasing costs.

The global oil refining market was valued at approximately USD 7.2 trillion in 2024 and is projected to grow. The Asia Pacific region holds the largest refining capacity, with India and China being key players. Major companies include integrated giants like ExxonMobil and independent refiners like Marathon Petroleum, competing on refinery complexity and efficiency. Large refining companies can achieve economies of scale and negotiate more competitive purchase contracts for raw materials.

The oil refining industry experienced strong profits recently, driven by robust margins and sustained demand, although profits have softened from record highs in 2022. The global oil refining market was valued at USD 1.7 trillion in 2023 and is projected to grow to USD 2.68 trillion by 2032. The refining and marketing sector is at a crossroads, with modest long-term growth projections for traditional fuels but strong growth projected for 2025 due to anticipated monetary easing worldwide. Jet fuel consumption is expected to grow significantly, driven by the recovery of the tourism sector. The industry faces challenges from slowing oil demand growth and the rise of non-refined products, requiring a focus on strategic capital allocation and technological innovation.

The Oil Refining/Marketing industry faces risks from commodity price volatility and economic sensitivity, where fluctuations in crude oil prices and weak economic conditions can impact profitability. Regulatory exposure is high due to stricter environmental regulations. Geopolitical factors can disrupt supply chains. Structural overcapacity and the long-term threat of electrification pose risks to demand. Managing low-value byproducts also presents a challenge.