Refineries face closure as global oil demand to peak in 2032 then start decline

One in five of the world's 700 oil refineries faces increasing risk of closure as global oil demand peaks and enters structural decline within the next decade, according to research from Wood Mackenzie, an energy and natural resources market analysis firm.

Global refined product demand currently stands at 105 million barrels per day. Wood Mackenzie forecasts a rise to 108 mb/d by 2032, after which decline sets in. Roughly 20% of existing global capacity sits on what the report terms a "downward escalator," facing falling or negative operating net cash margins and increasing risk of closure. Demand peaks in 2032, but with 2040 only three to four refinery turnaround cycles away, the window for major investment decisions is closing.

Despite this, some refinery investments will continue in locations such as India, driven by domestic demand growth and energy self-reliance policy, though it remains capacity added locally into a global market in structural decline.

"The sector has navigated structural change before, from the oil shocks of the 1970s to the investment capacity wave across the Middle East and Asia in the 2000s,” said Alan Gelder, SVP Refining, Chemicals and Oil Markets, Wood Mackenzie. “The current pressure is different in kind, not just degree. For the first time, the industry faces sustained decline in end-market demand rather than a temporary supply disruption. Scale, complexity and location determine which assets have genuine options. For those without structural advantages, the absence of a credible adaptation plan is not a deferral. It is a decision."

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