ABSTRACT
This chapter discusses the major changes occurring in the world refining industry. Economies of scale manifest themselves predictably but in a strange unit-cost pattern in the refining industry; the costs per unit of capacity decline for virtually all types of processing facilities in a refinery, and generally only large refineries can afford to install upgrading capacity. Although the flexibility in adjusting yields during distillation can substantially alter the output mix of the refining process, throughout most of the refining industry's history this flexibility has been insufficient to match the yields from crude distillation to the prevailing patterns of product demand. In the United States, price controls and the entitlement system, featuring its "small refiners' bias" clause, allowed the refining industry to continue expanding in a way that was largely unrelated to world market conditions. For less complicated refineries such as hydroskimmers, the average energy cost is less and the Gulf refinery has less competitive edge.
