Global oil refining margins may be at record highs but international majors are unlikely to reverse their move out of what is still considered a boom-and-bust industry, analysts say.

Record high US  gasoline prices and strong demand for motor and aviation fuels have propelled refining profits to all time highs.
At most integrated oil majors’s refining and marketing operations, the ‘downstream’ business as it is known has performed strongly in the past year, while shares in refiners such as Tesoro and Valero have soared.
“Many oil companies had long considered refineries to be a necessary evil, serving only as a means of disposing of the crude oil that had earned them such huge margins,” Standard Bank analyst William Buchanan said. “In 2004 this has all changed. Refineries are back in the black, big time.”
Major integrated oil firms have spent the last decade getting out of the refining business where persistently weak margins have made it a struggle to return cost of capital.
In spite of hardly building any refineries in Europe since the 1970s, most until recently had far more capacity than they could sell, reflecting an earlier fixation with having secure supply for their own marketing outlets.
Wood Mackenzie consultancy estimates 30-40 refineries shut in Europe in the 1980s. Its data shows Royal Dutch/Shell Group shed 33 per cent of its European refining capacity between 1980 and 2003, while BP lost up to 50 per cent.
Some analysts say the historically low-return nature of refining could be changing, in part because the majors have cut back so much.
Global capacity is now not able to keep pace with galloping demand growth led by China and the United States, they say.
Recently, a group of funds made a takeover bid for European refiner Petroplu, a signal that investors are closely watching the newly profitable sector for investment opportunities.
“Seeing people like Valero making good profits from refining could make the majors think of going back there,” said Cynthia Poynter of IHS Energy. “Especially if they start facing problems selling their crude, that could cut into upstream profits.”
The majors certainly have the cash to get back into refining now that margins are so much better. They are currently sitting on large cash piles thanks to $40 per barrel oil prices.