Refiners are expected to face new headwinds with the wider adoption of electric vehicles and policies intended to phase out fossil fuels. West Coast refineries, which typically serve Californian and Latin American drivers, operate in a market where zero-emission vehicle sales are growing the fastest and state governments are accelerating the energy transition by banning sales of new gasoline-only vehicles by 2035. Growing sales of electric vehicles in recent years have led forecasters to bring forward their projections for when global oil use will peak, as public subsidies and improved technology help lower prices for battery-powered cars. Transportation is responsible for about 60% of world oil demand, with the U.S. alone accounting for around 12%, according to the International Energy Agency. That share should fall, as the IEA expects EVs to erase some 5 million bpd of world oil demand by 2030. COSTLY MAINTENANCE The rising cost of maintenance and workloads to keep aging plants online have also deterred potential refinery buyers, particularly as companies focus on shareholder returns.

Valero , Marathon and Phillips 66 together had the equivalent of 280,000 bpd of capacity offline in 2023 due to planned and unplanned outages, a more than 20% increase from 2019, according to IIR Research. For some operators, the bill to repair these facilities can be enormous. Phillips 66 spent $786 million on maintenance in 2023, according to company filings. LyondellBasell's 260,000-bpd Houston refinery, which is scheduled to close next year after two failed attempts to sell, would have required about $1 billion in upgrades to continue operations, according to analyst and corporate estimates.

Shell has already closed its 240,000-bpd Convent, Louisiana, refinery, after failing to find a buyer during the pandemic. Seven other North American refineries have shuttered since capacity peaked at 19 million bpd in 2020, removing about 1 million bpd of capacity.

"Refiners are learning if they don't invest in their facilities before they put their plants up for sale, interest will dwindle," Aegis' Miller said.

(Reporting by Laura Sanicola and Shariq Khan; Editing by Liz Hampton and Marguerita Choy)

By Laura Sanicola and Shariq Khan