Britain’s Golden Refining Era Ends

The UK’s refining landscape is undergoing its sharpest contraction in decades. On April 29, Scotland’s only refinery Grangemouth ceased operations after more than a century of crude processing. The 145,000 b/d facility operated by Petroineos (a joint venture between China’s PetroChina and privately owned Ineos) had long been flagged as uncompetitive, with management warning in late 2023 that it could no longer operate profitably. Its planned conversion into a fuel import and storage hub highlights a broader shift: rather than producing fuels at home, the UK is increasingly restructuring its infrastructure to handle higher volumes of imported supply, at least in the short run.

Just weeks later, the sector took another hit. The Lindsey refinery in Lincolnshire, with 110,000 b/d of capacity, collapsed into insolvency in June, leaving the UK with just 4 major refinery plants. The government accused owner Prax Group of running up losses of about £75 million since acquiring the site in 2021 and ordered an investigation into the company’s management and financing structure. Hopes of a sale raised expectations in the local community, but no credible buyers have materialized, and operations have been halted.

That leaves the UK dependent on 4 refineries: ExxonMobil’s Fawley in Hampshire (270,000 b/d), Stanlow in Cheshire (210,000 b/d), Valero’s Pembroke in Wales (270,000 b/d), and Phillips 66’s Humber plant in North Lincolnshire (220,000 b/d). Together, they provide just over 1 million b/d of capacity – down by roughly a third from the levels available in the early 2010s, when a wave of closures began. This shrinking base is increasingly ill-suited to the country’s fuel mix needs.

Apart from increasing its dependence on imports, the UK is also increasingly dependent on US oil majors for its refining. Of the four remaining plants, three are operated by US companies - ExxonMobil, Valero and Phillips 66. Moreover, ExxonMobil’s Fawley refinery is the only plant in the south of the country, almost single-handedly meeting the transportation fuel needs of London and the metropolitan area.

UK refineries – designed around light sweet crudes – are optimized for gasoline production. Historically, the gasoline net balance has been positive, with the product being widely exported to North America, the Netherlands and Belgium (averaging around 150,000 b/d over the last five years). However, with the closure of refineries, the narrowing gasoline surplus will mean lower exports to the New York Area of the United States, potentially also lifting gasoline prices across the Atlantic.

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However, the structural mismatch is most visible in diesel. The country’s car fleet shifted toward diesel during the 2000s, creating a persistent deficit in the latter. Imports have filled the gap: in 2024, diesel accounted for 265,000 barrels a day (over a third) of the 624,000 b/d of clean products imported. Supplies came primarily from the US, Saudi Arabia, the Netherlands, and Belgium, the latter two advantaged by their proximity to UK terminals.

The reliance is only deepening. According to Kpler, UK diesel supply has fallen from 480,000 b/d in April 2022 to just 370,000 by September 2025, while demand – though also slightly declining – remains at 570,000 b/d. The Lindsey shutdown worsened the imbalance: ICE gasoil cracks surged from $16.50 a barrel on June 1 to $26.30 by the end of the month, and have since settled around $23, still signalling that Northwest Europe’s diesel shortage was aggravated by the unexpected refinery closure. For an economy already suffering from high inflation and energy costs, such price swings underline the vulnerability created by dwindling refining capacity.

Policy ambitions add another layer of complexity. Britain’s net-zero strategy envisages phasing out sales of new petrol and diesel cars by 2030, with the assumption that road fuel demand will steadily decline. Non-road diesel use is limited, and passenger car sales are shrinking, especially on the diesel side. Yet the transition is running up against real-world frictions: electric vehicles remain costly, battery materials are exposed to geopolitical volatility, and UK power prices have proven highly unstable. Combined with a cost-of-living crisis, these factors may push consumers to hold on to existing diesel cars longer than policymakers expect.

This creates a paradox. On paper, the UK is moving toward a future with less refining, less diesel demand, and more electrification. In practice, the loss of two refineries in one year has tightened supply, pushed up margins, and underscored how dependent the country is on imports. Unless demand erodes faster than expected, the diesel deficit could persist, leaving policymakers with an uncomfortable choice: stick to ambitious timelines or adapt to a market reality where consumers and energy security needs force delays.

By Natalia Katona for Oilprice.com

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