Oil Refineries Achieve Required Returns

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Oil refineries are achieving exceptional profits due to the ongoing war between America and Iran, the fear of closing the Strait of Hormuz, and the strikes or attacks on Russian refineries, which are estimated to be more than 23 Russian refineries. This will lead to a shortage in supplies and petroleum derivatives for the European continent, especially at the peak of demand for petroleum derivatives, particularly heating fuel and diesel.

Europe may turn to America and the Middle East; however, they do not possess the necessary quantities to finance and supply the European continent with the required amounts, especially since most petroleum derivatives from Gulf countries are directed eastward, as they are better in terms of added value and price differences between Europe and Southeast Asia. These markets are almost closed to petroleum products and derivatives from Gulf refineries, as they were built for Asian markets and are almost monopolized by them, such as India, Pakistan, China, and Japan. They are promising markets with potential for increasing growth, and in the absence of the required refineries.

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Efficiency on the margin! Therefore, Gulf countries may also head towards participating in refineries there or acquiring a stake to ensure their position and then increase their sales there. However, these markets currently do not have the appropriate legislation to establish oil partnerships there, unlike some countries such as China, Vietnam, the Philippines, and Japan, especially with the recent Saudi-Chinese partnership worth 4 billion dollars in the oil and petrochemical sectors. In fact, it is a wish of any oil company to establish a partnership with them, as they are considered the second-largest oil consumer, with about 16 million barrels per day, and they import about 8 million barrels per day. The largest countries from which they import include: Russia, Saudi Arabia, Malaysia, Iraq, and Brazil.

Currently, refineries are achieving the highest rate or percentage of profits due to global demand and a shortage of supplies of petroleum derivatives, due to the loss of significant refining capacity from Russian refineries that supply Europe, leading to an increase in profit margins for refineries and a rise in the prices of petroleum derivatives.

This represents a kind of nightmare for the current U.S. administration, which has been calling from the beginning for a reduction in fuel and petroleum derivative prices, especially automotive fuel, now facing the challenge of losing refining capacity in Europe and pressure on America to direct some supplies and petroleum derivatives to the European continent, despite the U.S. administration's objections out of fear of rising gasoline and diesel prices during the upcoming U.S. elections in November, which would indeed lead to losses in Republican seats and a loss of majority.

The U.S. administration may be caught between two fires: rising prices of petroleum derivatives leading to historic profits for refineries, and the Republican Party losing its majority due to the rising price of gasoline for the American consumer. The American consumer may direct their anger at the U.S. administration, but at the same time, this will benefit the few supporters of the current U.S. administration, which has achieved gains and profits due to the rise in oil product prices and thus the profit margin for refinery owners.

This also applies to all refineries, especially in the Arabian Gulf, where they were built for external export, especially to the East, which always achieves the best financial results without exception. Kuwait's ownership of 6 refineries locally and globally is the best oil investment for Kuwait. It was the pioneer and the first among all national oil-producing countries, and Kuwait exported its expertise to neighboring countries in global marketing management. It managed Arab refineries, including the Aden refinery, where it refined Kuwaiti oil and sold petroleum derivatives to neighboring countries.

Kuwait was a pioneer in the refining and refinery sector, and the Shuaiba refinery was the first among national refineries, with the private sector owning 40% of it. This is the joint investment between the government and the private sector.

Isn't it time to liberate the oil sector in Kuwait and return it to its true owners and founders! From the National Petroleum Company, the petrochemical industry, and oil tankers.

Independent oil writer and analyst