Crude and refined logic

One of the UK's eight oil refineries (Coryton, in Essex) is in big financial trouble, as its Swiss owner, Petroplus,  files for bankruptcy.  Whenever this sort of thing happens anywhere in the world, the usual suspects line up to advise us that the "downstream" portions of the energy industry -- the refineries, the gas stations -- are at best only marginally profitable. It's the exploration and production activity that earns all that lovely money for the oil majors.

Except it isn't, is it? Oh sure, that's how the industry has set itself up in recent years.  Just about every producer has bundled up its downstream operations and sold them off to undercapitalised, over-leveraged specialist operators such as Petroplus. And that's fair enough -- the speciality of the Exxons and BPs of this world is exploration and production,  not running a chain of retail outlets that appear to make most of their money from chocolate bars and snacks.

But ask yourself this. If all the refineries closed down overnight, just how profitable would exploration and production be?  Crude oil is every bit as useless on the ground as it is down the well; it only has value once it's been refined and moved to where the consumer can buy it. ALL of the profits in the oil industry actually come from the downstream stuff, even if that's not the way the producers want to portray it.