Oil prices are falling – why are refineries still losing money?
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I’d like to ask everyone: I heard that with falling oil prices, refining companies are still suffering losses. It’s a bit confusing – if raw material costs decrease and thus expenses go down, why would there still be losses?
During continuous price declines, refineries typically process crude oil at the price from 1 or 2 months earlier, while the selling prices of refined products are determined based on the current crude oil price.
In any case, the profits of CNPC’s refineries are better than in previous years. :)
:Lol, all the money goes to the gas stations. There are also restrictions related to the timing of raw material procurement; refineries need to stock up 2 to 3 months in advance
There is a time lag from procurement and processing to the production of finished products
You bought the goods yesterday for 2000 yuan, planned to sell them today for 2100 yuan, but today their value dropped to 1900 yuan, so you can only sell them for 2000 yuan. How are you supposed to make a profit in that situation?······
Oil refining is a time-consuming process. From the purchase of crude oil to the final delivery of refined products, imported crude oil from abroad has to go through steps such as ordering shipments, shipping, traveling across the sea, arriving at the port, being transported via pipelines inland, and then being refined into oil. This entire process takes at least 40 to 50 days; in other words, the cost of the crude oil used to produce gasoline is based on the price of that crude oil purchased 40 or 50 days earlier! Do you think refineries are losing money? And this doesn’t even include the costs associated with letter of credit financing!
During continuous price declines, refineries typically process crude oil at the price from 1 or 2 months earlier, while the selling prices of refined products are set based on the current crude oil price.
If that’s the case, then when prices rebound, lower crude oil prices from the previous months will still be used to produce finished products with higher prices. At that time, the profit came from the difference in price as it rose