U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
November 5, 1997

Environmental requirements have not been a major factor in the deterioration in major petroleum companies' refining/marketing profitability in the 1990's, according to the Energy Information Administration (EIA). In a recent study that included 24 of the largest U.S. energy companies, EIA examined the relationship between the low and generally declining profitability of U.S. refining operations in the 1990's and refiners' sharply increasing capital expenditures to comply with requirements of the Clean Air Act Amendments of 1990.

EIA's analysis showed that between 1988 and 1993, about 5 percent of the decline in net cash margin per barrel of refined product sold by these 24 companies, commonly called "the majors," came from increased operating costs that could be traced to pollution abatement. Over the same period, return on investment to their U.S. refining/marketing operations, declined by 12 percentage points; about 1 percentage point could be attributed to increased capital expenditures and operating costs for pollution abatement. Much more important was growth in light product capacity, particularly gasoline, and modest growth in refined product demand.

Drawing on financial and operating data from EIA's Financial Reporting System and estimates of pollution abatement costs and expenditures from the Bureau of the Census and the American Petroleum Institute, EIA compared financial measures for 1988-1989 with the most recently available data for 1993-1995. The earlier period was just prior to the Clean Air Act Amendments of 1990 and was one of high refining/marketing profitability.

The Impact of Environmental Compliance Costs on U.S. Refining Profitability can be accessed via the Worldwide Web at http//:www.eia.doe.gov. Under "Other Energy Groups," click on "Finance" and "Special Topics," then scroll down to the report. The direct Internet address is: http://www.eia.doe.gov/emeu/perfpro/ref_pi/contents.html.

The report described in this press release was prepared by the Energy Information Administration, the independent statistical and analytical agency within the U.S. Department of Energy. The information contained in the report and the press release should be attributed to the Energy Information Administration and should not be construed as advocating or reflecting any policy position of the Department of Energy or any other organization.

EIA Program Contact: Jon A. Rasmussen, 202-586-1449
EIA Press Contact: Thomas Welch, 202/586-1178

EIA-97-32

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