Refining in Europe? It’s cheaper to import.

The oil refinery at Fawley, Hampshire

The oil refinery at Fawley, Hampshire

Yesterday I attended a presentation in Strasbourg on the state of the refinery industry in Europe, delivered by a major player in European Refining. It raised some major issues, and confronted MEPs with the very serious consequences of some of their decisions.  I like refineries: I have an atavistic recollection of the oil refinery at Fawley in Hampshire (pictured).  As a child, I lived in Southampton, and I well recall many times visiting the New Forest and seeing the flare-off flames at the Fawley refinery.

For a long time now, I’ve been repeating a mantra with which regular readers will be all too familiar: “High energy prices are driving energy intensive businesses out of the EU altogether, taking their jobs, their investments and their tax revenues with them”.

When I repeat this phrase, I’m thinking of metals, paper and pulp, glass, chemicals, cement – the usual list of energy-intensive businesses.  It’s easy to forget that the refining of crude oil into petrol, diesel and so on is itself an energy intensive business, and one which is under immediate threat in the EU.  To be fair, I was already broadly aware of this.   Back in March this year I attended a presentation from the European Refinery Industry Association where we heard that UK refineries operate on a margin of less than 2p a litre, and that their profitability was about to be wiped out by the EU’s Fuel Quality Directive. But last night’s presentation brought the issue cogently back into focus.

Across the EU, the refinery industry employs around 100,000 people, and more than 24 million jobs are under threat in energy intensive industries. Today refinery industry pays taxes of €279 billion.  The corresponding figures for the UK are seven major refineries, paying £195 million in corporation tax. Direct and indirect employment is estimated at 26,400 jobs. Already in recent years we’ve seen 15 refineries closed in the EU, and more than 10 others are actually under threat of closure. There is also the refinery at the Ineos site in Grangemouth, Scotland, which came within an ace of closing recently and was only saved at the eleventh hour by the promise of cheap shale gas from the USA, which enabled the whole site to remain viable.

So what’s at risk here is jobs, GDP, security of supply, tax revenues.  And the reason?  Quite simply, that over-regulation, plus very high energy prices, have made the EU (and the UK) extremely unattractive places to do this business.   It is actually cheaper to import ready-processed petrol and diesel from the USA, or India, or various other sources, than it is to refine it in the UK.

We risk applying such extreme environmental and other standards in Europe, and such high energy costs, that it is simply cheaper to import than to produce under EU rules.  It’s a telling statistic that while within the EU we produce only 12 to 13% of global emissions, we are actually responsible for around 25% of global emissions when you factor in the emissions from products made elsewhere but imported to the EU.  Already half the emissions for which EU citizens are responsible occur outside the EU.  And we’re busy driving more abroad.

The net result of EU energy policy (and over-regulation) is (A) we are doing vast damage to the European economy; and (B) at the same time, we are failing to reduce emissions (which was our declared objective), and indeed we are very likely increasing them.  It’s time to stop this folly.

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25 Responses to Refining in Europe? It’s cheaper to import.

  1. Brin Jenkins says:

    Is there anyone left who thinks this destruction is not deliberate? It really is time to turn a few tables over and hold those responsible to account.

    • Mike Stallard says:

      How? They have made absolutely sure you can’t do it.

      • Brin Jenkins says:

        Not quite Mike, 14 police forces have accepted that Treason has been committed, and issued a Crime Number. This is such a serious crime that it is passed to the Met for action and, they are sat on their hands at present

        When the indolent and politically correct Metropolitan Police Force are persuaded to act according to the LAW, matters will change very quickly.

  2. Graham says:

    If these ‘facts’ are so obvious the pertinent question is why does the EU persist with its current policies? If they know the answer to that, it would help if they explained it to the European public. At least we might then be able to give support, assuming it’s a rational and acceptable reason. Otherwise, one must assume they are blindly following a dogmatic policy, irrespective of the likely outcome. Their choice. I won’t hold my breath though because the EU has a poor record of explaining itself. My best guess is that money, ie bribery, is at the heart of it. It’s the most plausible explanation.

    • The short answer is they’ve been hijacked by green ideology and the Al Gore tendency, and they simply refuse to think about the consequences. “We have to take action on climate change!” they cry, even though the effect of their action is to increase global emissions while destroying our economy.

  3. DougS says:

    “….High energy prices are driving energy intensive businesses out of the EU altogether, taking their jobs, their investments and their tax revenues with them….”.

    And their emissions Roger, to locations where they can emit even more CO2 – so the ‘carbon’ saving is negative!

  4. catalanbrian says:

    I think that you will find that the main reason for the decline in refinery capacity in the EU is that the majority of European refineries are old, built in the immediate post war years, and are thus geared to the production of petroleum. Demand for petroleum Europe wide has declined in favour of diesel in recent times and now these European refineries have a huge surplus of petroleum which they cannot sell. Practicality and economics (nothing to do with EU policies) have dictated that the EU imports diesel from the state of the art refineries in the USA, the Middle East and Asia, quite simply because not enough is produced in the EU and because it is cheaper to produce in these locations. For example cheap shale gas in the USA has lead to a reduction in refinery input energy costs in the USA, so they can produce at a cheaper rate than we can in Europe. But this is a world wide industry run by companies that live by global rules that they pretty much set themselves and if it is more efficient for us to import from, say the USA then that is what will (and should) happen. There is nothing wrong with that.

    Or perhaps you believe that we should go back to importing, for example, raw cotton and undertaking the entire production process here, rather than having it done in the most price efficient place. I doubt it, although as most of UKIP policies are retrograde, perhaps I am wrong about that.

    • Brin Jenkins says:

      Diesel fuel is only a little down the cracking table and this is adjusted depending upon consumer demand. Fawley is not a near derelict facility, it has been continually upgraded much as our steel industries had.

      Are you really unable to comprehend the systematic deconstruction of all our industries from WW2 onwards?

      Do you not see the social and political experiment moving us towards the Fabian New World?

    • Mike Stallard says:

      “Demand for petroleum Europe wide has declined in favour of diesel in recent times and now these European refineries have a huge surplus of petroleum which they cannot sell.”
      So why is petrol going for about 130p a litre at the pumps then? This does not accord with the price in other countries which I have visited recently.

      • catalanbrian says:

        The cost of fuel is made up of three main items. In the UK the cost of petrol delivered to the pump is about 50p per litre. The rest is duty, VAT and a small amount of about 5p per litre is the retailers margin It varies elsewhere because of different duty/VAT rates, and perhaps also to different margins put on by retailers. Essentially the basic cost delivered to the pump is pretty much the same throughout Europe. I stand by my comment that you quote above.

    • Brian, you make my point for me. The USA has cheap energy, and with our climate and energy policies in the EU we can’t compete. QED. Your suggestion that we should simply import everything we need is out-of touch with economic reality. How do we pay for it if we driven most large-scale industry away and proved that we’re closed for business?

  5. Neil craig says:

    That the emissions for the goods we use are twice what we actually manufacture suggests that, simply by allowing us to manufacture we would within not many years, be able to have a total gdp twice what we have now. That is taking no account of normal growth rates possible in an economically free, low energy cost society.

  6. DICK R says:

    The French, Germans , Spanish , and Italians will of course only pay lip service to these new regulations, meanwhile our gullible idiots will make sure that they are imposed to the letter , in the full knowledge that in a couple of years or so it will mean the closure of yet another british manufacturing industry,thus increasing our energy dependence on the EU even more than now.

  7. silverminer says:

    I’ve often been amazed that the Iranians suffer from petrol shortages! However, it seems that that despite being a net exporter of crude they don’t have enough refinery capacity to produce the petrol they need. How long before we get ourselves in the same situation through wrong headed meddling in the energy markets to enact ineffective solutions to what is a non-problem (AGW)?

  8. Mike Stallard says:

    OK Mr Helmer. You have made me cross. My trouble is this: I do not want to see the Unions in No 10 Downing Street in just over a year’s time.At the moment, it seems to be the obvious future: back to the 1970s.
    In the recent local elections, UKIP and the Conservatives have almost neatly split the right wing down the middle in all seats. We can never hope to gain power in 2015 like that. Let us not pretend.
    And I really cannot see any reconciliation either. We have a very good MP (Con), yet posts like this make me wild with anger at Berlaymont and its environs! Perhaps the proverbial bus might do the trick?

    • catalanbrian says:

      Brin Jenkins. Loon headed is posing questions such as ” Are you really unable to comprehend the systematic deconstruction of all our industries from WW2 onwards?

      Do you not see the social and political experiment moving us towards the Fabian New World?”

      • Brin Jenkins says:

        Catalanbrian you seem to have little knowledge of the Fabian Society and the Frankfurt School. Reading the manifestos of Marx, Hegel, and Trotsky their progress is remarkable and well planned. Loon headed might be reserved for the less informed commenter.

        Why not Goggle Frankfurt School there is much written about them.

        This is a rather good article from the Catholic Insight.
        http://www.thetruthseeker.co.uk/oldsite/article.asp?ID=13488

      • Brin Jenkins says:

        No, Brian what you mean is that you have no case to argue, I have shown everything that I have claimed is supported by historical data and manifestos from 1926, and where you find it.

        You seem to be suggesting that Catholic Insight is a conspiracy site! It’s not I that’s loon headed.

        You’r claiming conspiracy theory, and dismiss it as such! Do we have a World wide coincidence situation. Twice may be coincidence, after that you should seek further for the truth.

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