ARKANSAS, Sept 20 (Future Headlines)- Exxon Mobil Corp (XOM.N) expects its motor fuels and chemicals earnings to reach $16 billion by 2027, a substantial increase of about $4 billion from its current levels. This optimistic outlook is driven by several factors, including strong refining profits, a significant expansion of refining capacity, and a strategic focus on higher-margin chemicals. Exxon’s executives anticipate that the demand for gasoline will continue to rise, and they foresee a more extended timeframe for when gasoline demand might peak compared to other forecasters.
Exxon’s robust refining profits in recent years can be attributed to its substantial expansion of refining capacity and its emphasis on higher-margin chemical products. This approach has enabled the company to navigate the complexities of the energy market by quickly shifting its focus between fuels and chemicals based on where the highest profits can be realized.
One notable aspect of Exxon’s outlook is its perspective on gasoline demand. While some forecasters anticipate a decline in gasoline consumption, Exxon’s executives believe that gasoline demand will remain strong, with a peak expected toward the end of the decade. However, they anticipate that this peak will be followed by a lengthy plateau, suggesting a more extended period of sustained demand.
The International Energy Agency (IEA), representing oil-consuming nations, has a different viewpoint, expecting the use of oil for transportation fuels to decline after 2026. Similarly, U.S. government agencies have indicated that U.S. gasoline consumption may have already reached its peak in 2018. Exxon’s stance on the longevity of gasoline demand sets it apart from these forecasts.
Exxon’s strategy for maximizing profits involves the integration of its refining, petrochemicals, and low-carbon businesses into a single unit. This unified approach allows the company to adapt quickly to market conditions, focusing on the areas of greatest demand and profitability. Exxon’s Karen McKee, President of the Product Solutions unit, believes that this integrated approach could be a game-changer for the company, enabling it to respond effectively to evolving market dynamics.
Exxon’s Beaumont, Texas refinery serves as a prime example of its capacity expansion efforts. The refinery underwent a significant expansion, increasing its processing capacity by 250,000 barrels per day (bpd) in January, bringing its total capacity to 619,024 bpd. This refinery primarily processes crude oil from Exxon’s West Texas oilfields, with a focus on diesel fuel production. According to McKee, the Beaumont refinery has been running exceptionally well since the expansion.
As the demand for traditional fuels may wane in the future, Exxon is positioning its refineries to supply new markets without the need for additional refining expansions. Instead of increasing throughput, Exxon plans to upgrade existing units to meet changing market demands. Exxon’s Baytown, Texas refinery, which is co-located with a chemical unit, is another key asset in its strategy. The refinery, with a capacity of 564,440 bpd, provides Exxon with the flexibility to transition from primarily producing fuels to focusing on chemicals. Senior Vice President Jack Williams emphasized that while refining will remain a critical part of Exxon’s operations, an increasing portion of the company’s activities will shift toward chemical production.
While some forecasters anticipate declining gasoline demand, Exxon believes that demand will remain robust, with a prolonged plateau period following a peak toward the end of the decade. Exxon’s ability to adapt and respond to evolving market dynamics positions it to thrive in an ever-changing energy landscape.
Writing by Moe Khaled; Editing by Sarah White