> ## Content Index
> Fetch the complete content index at: https://the-capital-memo.ghost.io/llms.txt
> Use this file to discover other available public pages before exploring further.

# A Hundred and Thirty Refineries and No Spare Ones
- URL: https://the-capital-memo.ghost.io/a-hundred-and-thirty-refineries-and-no-spare-ones/
- Published: 2026-09-29T11:40:29.000Z
- Updated: 2026-09-29T11:40:29.000Z
- Author: James Coleman

The United States began this year with 130 operating refineries and 18.2 million barrels a day of crude distillation capacity. In the week ending the eleventh of September those plants ran at 96.8 percent of capacity, and they have run above 97 percent for most of the late summer. Valero closed its Benicia refinery in California in April, 145,000 barrels a day, following the Phillips 66 plant in Los Angeles last October and LyondellBasell's Houston refinery the year before. California alone has lost about seventeen percent of its refining capacity in eighteen months.  
  
The national capacity number is less alarming than it sounds, down roughly four percent from the January 2020 peak. The utilisation number is the one to sit with. A system running at 97 percent has no unit it can bring forward when something breaks, and something always breaks.

### The Historical Echo

The American refining industry has already run this experiment once, and the surprise is what it converged on rather than what it lost.  
  
In 1981 the United States had about 18.5 million barrels a day of capacity running at 12.7 million, a utilisation rate of 69 percent and the lowest on record. That surplus was manufactured by policy. The crude oil entitlements programme and price controls of the 1970s had subsidised a population of small, unsophisticated plants into existence, and when crude prices were decontrolled in January 1981 the subsidy disappeared with them. What followed was the fastest capacity liquidation in the industry's history. Operable capacity fell from 17.9 million barrels a day at the start of 1982 to 15.5 million by the start of 1986, a loss of nearly fourteen percent in four years, and the plant count fell from 301 to 258 in a single year.  
  
Then comes the instructive part. The capacity came back, and not one large new refinery was built to bring it. No grassroots plant of any size has been completed in the United States since Garyville, Louisiana, in 1977\. Instead the survivors absorbed the demand by expanding on ground they already occupied, and utilisation climbed from 69 percent in 1981 to the high nineties now. The country ended up with fewer than half as many plants carrying slightly more capacity than the 301 of 1982 did, and with the operational slack engineered out of the system as a matter of commercial logic. Idle capacity is a cost. Nobody pays to hold it.  
  
A smaller and sharper version of the same story played out in Australia, which had eight refineries at the start of this century and two by the middle of 2021, after which it imported over ninety percent of its refined fuel and the government resorted to direct payments to keep what remained.

### Where Patient Capital Is Positioning

Two facts sit awkwardly together and both are true. The United States is a substantial net exporter of crude and refined products, and its total product imports actually fell last year. At the same time the West Coast, which is pipeline isolated from the rest of the country and requires a fuel specification almost nobody else makes, has just lost a sixth of its capacity and will be met by cargoes from Asia.  
  
That is the shape of the modern problem. National sufficiency and regional fragility are not in conflict. A system at 97 percent utilisation transmits a local outage into price rather than into volume, because there is no idle unit anywhere to make up the barrels. Diesel crack spreads are forecast above two dollars a gallon through the autumn, which is the same fact expressed in money.  
  
For capital that thinks across generations, the useful frame is the one this letter keeps arriving at from different directions. The scarce thing is almost never the resource. America has no shortage of crude oil. What it has is a finite and shrinking number of places where crude can be turned into something a truck can burn, each of them built decades ago, none of them replaceable inside a decade, and all of them already running flat out.  
  
The practical implication for a family holding energy interests is to think about location and access rather than headline reserves. A barrel produced where it can reach a running refinery is worth more than a barrel that cannot, and that differential is not a market quirk. It is the price of the missing slack, and it will keep being paid for as long as nobody builds a refinery, which on the evidence of the last forty nine years is a long time.

![](https://storage.ghost.io/c/44/88/44885750-7681-4d57-825f-5d69f4c60045/content/images/2026/09/a-hundred-and-thirty-refineries-and-no-spare-ones-cinematic.jpg)

The Capital Memo