Refined product demand is expected to peak at 108 million barrels per day (mmbbl/d) in 2032, from 105 mmbbl/d in 2025, before declining, said Wood Mackenzie in its Horizon report titled “Adapt or die: Why oil refineries must evolve to survive”
“As competition intensifies, refineries will need to adapt to survive and thrive. Others unable to adapt will struggle to remain commercially viable,” said Mackenzie, noting that around 20% of existing global capacity faces increasing closure risk.
Mackenzie, a global leader in data, analytics and insights for the energy and natural resources industry, examined available options for refineries to adapt to the changing energy landscape shaped by macroeconomic, geopolitical and energy transition pressures.
The report projected that global oil demand will peak in the early 2030s and decline gradually after that, driven by slower population growth, increasing electrification, and improvements in fuel efficiency. However, the pace of the energy transition will vary across regions.
Gasoline demand is expected to face the greatest pressure from the growing adoption of electric vehicles (EVs), while diesel/ gasoil and jet/kerosene demand will remain comparatively resilient due to the challenges of decarbonizing heavy transportation and aviation.
Meanwhile, demand for liquefied petroleum gas (LPG) and naphtha will be supported by growing petrochemical feedstock requirements. Products, including lubricants, waxes, and bitumen, are also expected to remain relatively isolated from the energy transition.
Despite these long-term challenges, the refining sector has recently benefited from record-high margins as disruptions to Middle Eastern oil supplies and damage to Russian refineries have constrained global crude oil and petroleum product availability.
However, Wood Mackenzie expects these elevated margins to return to more moderate levels following the end of the Middle East conflict, increasing pressure on refiners to improve operational efficiency and competitiveness.
The report identified several strategies that could help refineries adapt to changing market conditions, including greater petrochemical integration, investment in advanced processing technologies, diversification into specialty products, and the production of lower-carbon fuels.
Petrochemical integration represents one of the primary opportunities for refineries to offset declining transportation fuel demand by shifting production toward higher-value chemicals, including olefins, aromatics, and polymers.
Refineries may also invest in carbon capture and storage (CCS) technologies to reduce operational emissions, particularly in Europe and other regions facing environmental regulations. However, high investment and operating costs remain major barriers to widespread adoption.
Other adaptation strategies include expanding conventional refining capabilities, consolidating processing capacity, integrating operations across the oil value chain, and diversifying into adjacent businesses such as renewable energy, electricity generation, natural gas, and energy storage.
Mackenzie noted that investments in new refining capacity will become increasingly difficult to justify as global petroleum product demand declines.
Nevertheless, countries prioritizing domestic energy security and industrial development are expected to continue expanding refining capacity. India alone is projected to account for 40% of global refining capacity additions through 2030, supported by efforts to strengthen energy self-sufficiency.
For refineries unable to maintain profitability or secure the investments required to adapt, the report identified alternative options, including conversion into oil storage terminals, redevelopment for other industrial activities, or permanent closure.
