Europe’s oil refineries have not made this much money in years. But behind the record profits, the industry powering petrol pumps, jets and army tanks is quietly disappearing, refinery by refinery. Both drivers and soldiers could pay the price.
Europe’s oil refining sector is enjoying a moment it thought it had lost forever. War in the Middle East has closed the Strait of Hormuz and damaged Iranian refineries, reviving fears over jet fuel supplies that Brussels had earlier played down. European plants are now running flat out. Brussels is watching nervously, caught between its climate goals and the fear of running short of fuel. According to S&P Global Energy, the resulting scarcity has driven refining margins to some of their highest levels this century.
Yet the same data paint a grimmer long-term picture. European refining capacity has been shrinking for decades, down from 14 million barrels a day at the turn of the century. According to S&P Global Energy, that decline is set to continue. Capacity will fall by a further fifth over the decade to 2035, settling at just over 9 million barrels a day. The United States faces a much gentler decline of seven per cent over the same period. Refineries in the Middle East, India, Africa, and China, meanwhile, keep expanding.
A windfall, not a turnaround
Daniel Evans, head of refining at S&P Global, put it bluntly. The shock of the war has “prompted a rethink about the strategic importance of refining in the west,” he told the Financial Times, but it has not changed the sector’s underlying direction. Investors, in other words, are not rushing back in.
Eugene Lindell heads refined products at consultancy FGE NexantECA. He expects governments to hold off pressuring ageing plants to close for now. “It would be the wrong signal to send,” he said. He does not, however, expect this reprieve to last much beyond 18 months. After that, older and smaller refineries will start shutting again, regardless of the political mood.
You might be interested
The numbers already tell that story. Europe shut down roughly 500,000 barrels a day of refining capacity last year alone. The United Kingdom lost two of its six refineries. Newly built, highly competitive plants in China, the Middle East, India, and Africa are quietly taking over the business Europe is leaving behind.
Brussels’ balancing act
Brussels has noticed the risk. In its AccelerateEU communication of 22 April, the European Commission set out plans to coordinate member states’ responses to the energy crisis. These include measures to safeguard supplies of diesel and jet fuel, alongside a faster shift towards home-grown clean energy. The Commission’s own figures show the EU still imports 57 per cent of the energy it consumes. That dependence cost some €340bn in 2025 alone.
Electric vehicles add another layer to the puzzle. Battery-electric cars reached 20.7 per cent of new EU car registrations in the first half of 2026, according to the European Automobile Manufacturers’ Association. That is up from 15.6 per cent a year earlier. Sales climbed by nearly 63 per cent in France and 48 per cent in Germany. Falling fuel demand of this kind is one of several factors keeping investors away from new refining projects. Costly plant upgrades, tightening emissions rules, and competition from newer refineries elsewhere all play a part too.
Tanks and jets do not run on hydrogen
Dev Sanyal runs Varo Preem, whose refineries supply a tenth of Europe’s road fuel. He argues that policymakers are finally starting to think further ahead. Years of small refinery closures, he said, have left the region dangerously dependent on imported fuel. He also points to a dimension often missing from the climate debate: defence.
The reality is when you start thinking about F-35 jets and Leopard tanks they don’t run on hydrogen, they run on conventional energy. — Dev Sanyal, chief executive, Varo Preem
“The reality is when you start thinking about F-35 jets and Leopard tanks they don’t run on hydrogen, they run on conventional energy,” he said. He was drawing a direct line between Europe’s rearmament drive and its refining capacity.
Whether refineries survive often comes down to a single decision point: the “turnaround”. This is the periodic, hugely expensive overhaul every plant needs every few years. Alan Gelder of Wood Mackenzie has seen owners walk away from ageing sites once the bill lands, as happened at Grangemouth in Scotland. Given the outlook for margins once today’s war premium fades, more owners are expected to make the same call.
For Brussels, the dilemma is uncomfortable. It must decarbonise fast enough to meet its climate goals. At the same time, it needs enough refining capacity at home to fuel its cars, its planes and, increasingly, its tanks. For now, the bloc is trying to do both at once. It is coordinating gas storage and emergency fuel supplies while pouring money into the clean energy transition. Whether that balancing act holds may depend less on Brussels than on one simple factor: how long the current war-driven boom keeps ageing refineries alive.
