FOCUS: Electric vehicles spell more trouble for Europe's already troubled refiners

• Published date: 01 September 2017
• DOI: http://doi.org/10.1111/oet.12523
• Date: 01 September 2017

FOCUS

Electric vehicles spell more trouble for Europe’s already troubled reners

Electric vehicles have become the latest of a series of

threats to Europe’s already beleaguered renery sec-

tor, which has seen th e closure of more than 2 mn

bpd of capacity in recent years from a combination of

falling demand for rened products and an increas-

ing number of environmental directives from the EU.

Demand looks s et to fall further as a result of re cent

movesbyEuropeangovernmentstobanorrestrict

petrol- and diesel-powered motor cars from various

dates up to about 2040. In the meantime, reners’ pro-

ductioncostsarelikelytogoonrisingastheyseek

to comply with legislation covering emissions and fuel

quality.

e problem is particularly acute for Europe’s older

and less sophisticated reneries since, in addition to the

fall in demand, they face increasing competit ion from

new and more cost-ecient reneries overseas. Several

are already on-stream, mainly in Asia and the Middle

East, and more are due to start-up later this year. Further

renery clo sures are inevitable.

Policy changes

Much of the EU’s policy on transport fuels has focused

on carbon emissions f rom motor vehicles. e ee ct

of this has been to favor diesel-powered vehicles over

petrol-driven ones on the grounds that the former pro-

duce less carbon dioxide per mile than those that run on

gasoline. e policy had strong political backing from

Germany and France: the EU’s principal manufacturers

of diesel vehicles.

e policy started to unravel, however, when it

emerged in 2015 that German car-maker, Volkswagen,

had installed soware in its diesel motor cars that was

designed to record lower levels of pol lution when teste d

by US regulators than was the case under actual driving

conditions [1]. e EU’s carbon reduction policies also

ignored the higher levels of particulates and nitrogen

dioxide in emissions from diesel vehicles. Several studies

of diesel emissions i n urban areas identied dangerously

high levels of air pollution that constituted a hazard to

health [2].

Growing concerns about diesel exhaust emissions has

led to calls for controls on the use of the fuel. Initially,

there were proposals for an end to taxes thathad favored

diesel over gasoline, along with restrictions on the use

of diesel vehicles in urban areas. Recently, however,

some European governments have announced plans to

phase-out diesel cars altogether.

In several cases, including recently the UK and France,

it has been proposed to ban petrol vehicles as well, in

favor of a wholesale switch to electric vehicles. Other

European countries that have decided to go this route

include Germany and Norway. e phase-outs come in

the form of a ban on the sale of d iesel and gasoline c ars:

in the case of the UK and France in 2040; in Germany

in 2030 and 2025 in Norway. Gasoline and diesel will

therefore still be required aer this date for motor cars,

and most commercial vehicles are likely to go on using

liquid fuels until new batteries are developed for use on

heavy goods vehicles.

Trying to satisfy demand

Europe’s reners have been spend ing heavily for some

years to meet the demand for diesel following the stim-

ulusgiventoitsconsumptionbyfavorabletaxrates

and other in centives . e contine nt’s rening system

was traditionally congured to produce gasoline, but as

demand for diesel grew many reners invested heav-

ily in hydro-cracking in order to increase their yields

of diesel. At the end of the 1990s, consumption of

gasoline and diesel was more or less equal across the

EU. Now, automotive diesel consumption is more than

twicethatofgasolineandtheEUisanetimporter

of diesel while at the same time having a gasoline

surplus.

e problems with diesel exhaust emissions were

expected to produce something of a switch back to

gasoline-powered cars, giving the EU’s reneries a more

balanced product slate; but plans announced in sev-

eral memb er-countries in re cent months t o phase-out

gasoline as well as diesel cars mean that EU reners are

likely to have a surplus of both fuels within the next

15-20 years.

Reners in other regions could also have a signicant

excess of the two fuels, especially if concerns over diesel

emissions aect the consumption of diesel in these

areas. China already plans to reduce demand for both

dieselandgasolineinaneorttotackletheproblemof

pollution in its major cities and is putting a good deal of

eort into developing the necessary battery technology

for electric vehicles. Other parts of Asia could well

follow suit.

For the present, however,Asia is the scene of a number

of schemes designed to add both distillation and upgrad-

ing capacity to its rening sector. Some oft he diesel and

gasoline produced as a result is likely to be exported

westward: not only to Europe but a lso to some of Euro-

pean reners’ export markets, including Africa and the

Americas. All of this makes renery closures in Europe

inevitable, notwithstanding the large capacitylosses t hat

have already occu rred.

© 2017 John Wiley& Sons Ltd