U.S. oil refineries a tough sell in a recession

NEW YORK (Reuters) – U.S. oil companies may need to start pulling their unwanted refineries off the auction block if they want to avoid selling into the worst market for energy assets in more than six years.

The gloomy market is bad news for companies seeking to shrink their exposure to weak fuel demand in the recession-hit United States, but presents an opportunity for upstarts and national oil firms hoping to expand into a recovery.

“Clearly, the sellers are selling into what can only be called a distressed market,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Refinery prices have been hit by low demand for gasoline and diesel due to the ailing economy that has shrunk profit margins from their peaks a couple of years ago, making these plants an unattractive investment.

Demand for gasoline in the United States, the world’s top consumer of oil, fell for the first time since 1991 last year and the government does not expect the nation’s energy consumption to grow again until 2010.

The pool of potential buyers for the oil refineries has also been narrowed by the shrinking of credit availability.

Reuters