European Petroleum Conference 2024 — refinery margins, biofuels, and the EU energy transition

Refinery margins after the 2022 spike

The 2022 European refinery crack spread spike — diesel margins reached USD 60–70/bbl in mid-2022, compared with a typical USD 10–15/bbl — was caused by a combination of Russian product export disruption, post-COVID demand recovery, and the loss of Ukrainian refining capacity. By mid-2024, European diesel crack spreads had returned to a more normal USD 15–25/bbl range as new refinery capacity from the Middle East and Asia came on stream.

The Eurostat energy statistics showed European refinery runs stabilising at around 11–12 million barrels per day after a 2020–2022 disruption period. S&P Global Platts and Argus Media both presented market intelligence at the conference showing that North West European (NWE) diesel crack spreads had de-correlated somewhat from US Gulf Coast spreads, reflecting the structural change in Russian product flows.

For a detailed explanation of how crack spreads translate into pump prices, see our crack spread glossary entry.

European refinery capacity outlook

Europe has been a net loser of refinery capacity over the past decade, with closures outpacing upgrades. Notable recent closures include Shell's Rhineland refinery partial shutdown, ExxonMobil's Fawley (UK) hydrocracker reconfiguration, and the conversion of TotalEnergies' La Mède facility to a biorefinery. The trend reflects both economics and policy: European refineries face higher carbon costs under the EU ETS than Asian or Middle Eastern competitors.

The capacity gap has been partly filled by imports from Middle Eastern mega-refineries (Saudi Aramco's Jazan, Kuwait's Al-Zour) and Indian exporters (Reliance Jamnagar). From a consumer standpoint this is largely invisible — imported diesel and petrol meet the same EN 228/EN 590 standards as domestically refined product — but it changes the geopolitics of European fuel supply and the exposure to non-EU pricing dynamics.

Biofuels mandates and RED III

The EU's revised Renewable Energy Directive (RED III, Directive 2023/2413) sets a 14.5 % renewable energy share in transport by 2030, up from RED II's 14 %. Key provisions relevant to refiners and blenders:

• A minimum 5.5 % sub-target for advanced biofuels (from waste and residues listed in Annex IX parts A and B).
• A cap on conventional biofuels (from food and feed crops) of 7 % of transport energy — frozen at 2020 consumption levels where that is lower.
• The biomass-based diesel (FAME/HVO) blend component in road diesel is the primary delivery mechanism for most member states.

Refiners at the conference noted that Hydrotreated Vegetable Oil (HVO) — also called renewable diesel — was the preferred compliance pathway because it is chemically identical to fossil diesel, requires no engine modification, and can be processed in adapted refinery units. Neste, the largest HVO producer, presented capacity expansion plans at its Rotterdam and Singapore facilities. The ETIP Bioenergy platform provided feedstock availability analysis for conference delegates.

For the ethanol blending side of the equation (petrol rather than diesel), see our E10 and E85 glossary entry.

The 2035 ICE ban and fuel demand

EU Regulation 2023/851 requires zero CO2 emissions from all new passenger cars and light commercial vehicles sold in the EU from 2035. This does not immediately affect existing vehicles — the European car parc turns over roughly 7–8 % per year — so petrol and diesel demand from road transport will decline gradually rather than cliff-edge, with the steepest falls beginning in the early 2030s as the new EV fleet share compounds.

The IEA Global EV Outlook 2024 projected European road transport fuel demand declining 20–25 % by 2035 from 2023 levels under current policies. Conference delegates noted that this creates a strategic planning horizon: refineries approved today will still be operating in 2040, meaning investment decisions must account for a world where European petrol and diesel volumes are structurally lower.

E-fuels: niche or lifeline?

EU Regulation 2023/851 includes a derogation: vehicles running exclusively on EU-certified e-fuels (synthetic fuels produced from captured CO2 and green hydrogen) may continue to be sold after 2035. This was inserted following intense lobbying from Germany and automotive suppliers including Porsche, which has invested in HIF Global's Haru Oni e-methanol plant in Chile.

Refining industry representatives at the conference were cautiously interested in e-fuels as a potential future product stream — e-diesel and e-kerosene use the same Fischer-Tropsch chemistry as gas-to-liquids (GTL) — but noted that current e-fuel production costs of EUR 2–4/litre were three to five times the wholesale cost of conventional petrol or diesel. The IRENA Innovation Outlook on Electrofuels sets out the cost reduction pathway needed for e-fuels to become commercially relevant before 2030.

For the near-term EV vs petrol cost comparison, see our EV charging costs vs. petrol article.