Like many other segments of the economy, petroleum refiners have been severely affected by the COVID-19 pandemic. Steep declines in air travel have caused demand for highly profitable jet fuels to plummet, while US consumers – many of whom now have zero-mile commutes – use far less gasoline. Thus, refiners – like downstream producers and other petroleum industry participants – have seen declines in profitability.
A recent article showcased the difficulties faced by the refining sector. While demand for gasoline and some other petroleum products has largely rebounded as shelter-in-place orders have been lifted, jet fuel use remains low, causing refiners to move to keep facilities closed or to operate at lower capacities, further affecting their profitability.
Furthermore, another threat looms on the horizon: the potential of the electric vehicle, which largely obviate the need for gasoline. While many are familiar with Tesla, a number of other firms are looking to enter the electric vehicle market. Monday’s announcement that Lordstown Motor Company – a firm dedicated to the manufacture of electric pickup trucks – would be going public as part of a reverse merger, demonstrated the continuing interest in electric vehicles. The more widespread introduction of electric-powered trucks and automobiles would cause severe disruptions to refiners, as a key end use for their products would slowly shrink. While packaging has boosted the fortunes of many refiners due to heightened interest in single-use plastics, this, too is not expected to last, especially once the COVID-19 pandemic passes.
For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the COVID-19 with a comparison to historical recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.