Downstream: Refining, Petrochemicals and Fuels

Crude oil is useless until it is refined. Downstream is the business of turning crude into gasoline, diesel, jet fuel, naphtha, liquefied petroleum gas, asphalt and petrochemical feedstocks, and of selling those fuels to motorists, airlines, ships and factories. Its economics are a spread: a refiner buys crude and sells products, and its margin is the difference — the crack spread — less the cost of running a plant that operates continuously, is dangerous, needs constant maintenance and lasts half a century. That spread is set by global product markets, not by the refiner, and swings from near zero (2020, when demand collapsed) to record highs (2022, when diesel cracks above $60/bbl followed Russia's invasion of Ukraine; reported). Three structural shifts define the 2020s. First, capacity is moving east and south: new mega-refineries in China, India, the Middle East and Africa — above all Dangote's ~650,000 b/d Lekki refinery in Nigeria, which by 2026 was running at or above nameplate and had turned Nigeria into a net petrol exporter (reported) — while old plants in Europe and California close; California lost ~17% of its refining capacity with the shutdowns of Phillips 66's Los Angeles refinery (late 2025) and Valero's Benicia refinery (early 2026) (Argus, reported). Second, petrochemicals were meant to be the growth market as fuel demand peaks, and instead a Chinese capacity wave crushed margins from 2023. Third, policy made new fuels: US renewable-fuel mandates and credits (RINs, the 45Z credit), state low-carbon fuel standards and EU mandates created a renewable-diesel and sustainable-aviation-fuel industry whose profits depend almost entirely on regulation. This section explains refinery configuration and complexity, crack spreads and margins, closures and new builds, petrochemicals, fuel retail, biofuels and RINs, and how to read downstream numbers.