Independent Oil Analyst International oil companies are closing down refineries and cleaning their sites for the purpose of replacing oil with clean fuel products made of vegetable oils and animal fats.
Their objective behind this is to meet the new trends and global governmental regulation for cleaner air. More refineries are simply moving away from refining oil as this would not make enough profit margins for it to be sustainable in the long run. Globally , markets are currently investing in renewable energy and biofuels. Phillips 66 announced the conversion of its refinery in San Francisco in 2022 into a clean refinery site without the emission of any harmful gases and soot into the air.
It is estimated to cost around $1 billion, but it is not known how much local and federal government will assist in making cleaner air.
Other oil companies are also taking similar steps such as Marathon Oil in California, as they believe the time is right and ripe to switch away from oil in pursuit for more friendlier products with the support and some incentives from the federal government. ExxonMobil, the largest international oil company, is planning to buy around three million barrels of renewable diesel produced from animal fat from the local market in order to remain competitive and become a leader in the biofuel market and with the use of the same old oil refineries, which would be converted to non-oil based refineries.
The changes in the oil market structure is alarming. The shift from petroleum products is raising the alarm about how long oil will remain sustainable after the most important element of transportation of diesel and motor gasoline is taken away. Can oil only be used for the petrochemical industry with the arrival of electrical energy before the end of 2025? Finally, oil companies now can convert their refineries and sites into other major projects that are sustainable on a long-term basis without experiencing heavy losses or environmental claims from local authorities. It is a better solution and can save some jobs.
What is OPEC going to do in facing this new challenge? How to stop consumers from switching to environmentally friendly products? How soon will the switch take place? What is OPEC going to do about the disappearance of its consumers, and, more importantly, the high oil revenues? How can we replace the daily revenues worth billions of dollars? I hope the message is crystal clear to the oil-dependent governments and companies.
By Kamel Al-Harami