Margin volatility in the post-pandemic era: Preparing for the next decade

The refining industry is entering a defining decade, one shaped not by the extraordinary profit highs of the post-pandemic recovery, but by a more complex landscape of structural change, uncertain demand patterns, and persistent margin volatility. Our Annual World Refining Outlook 2025 highlights that this sector is undergoing one of its most profound transformations in decades, with operators facing both heightened risks and new opportunities as global markets rebalance.

This post explores the key forces behind the shift to a volatile margin environment and what refiners must do to prepare for the next ten years.

A New Margin Environment: Supported Yet Volatile

During the extraordinary boom that followed pandemic era disruptions, global refining margins reached historic highs. This boom has faded, ushering in a period where margins will remain “supported, but volatile and uncertain” through the coming decade.

This volatility is driven by several converging pressures:

• Shifting product demand, particularly the rise of petrochemical feedstocks and the decline of traditional transport fuels in mature markets.

• Structural realignment of global capacity, with new, highly efficient refineries coming online in the East and significant closures in the West.

• Macro‑economic headwinds, including slower growth forecasts, fluctuating crude prices, and geopolitical fragility.

While margins are unlikely to collapse to the lows seen in the late 2010s, the days of predictable upward trends are over. Instead, refiners must prepare for oscillations driven by both local disruptions and global rebalancing.

Capacity Additions Slow - But Closures Accelerate

One of the clearest global trends is the slowdown in new refining capacity growth. Our research projects that additions will stall by the end of the decade, even as global oil product demand continues to grow modestly. This mismatch between supply and demand can amplify margin swings, particularly in regions with aging assets.

Compounding the issue is a wave of closures, especially in mature markets such as Europe and parts of North America. We highlight that closures in 2025 reached their highest level since 2021. Many of these shutdowns were driven by:

• Persistent margin pressure

• Rising regulatory and operating costs

• The capital expense of compliance with decarbonisation mandates

• Long-term demand erosion for gasoline and diesel‑term demand erosion for gasoline and diesel

This tightening of functional capacity makes the global system more sensitive to disruptions—from seasonal outages to unplanned shutdowns and geopolitical events.

East of Suez Leads; West of Suez Lags

Another trend shaping future margins is the widening regional divide between East of Suez (EoS) and West of Suez (WoS) refining markets.

• EoS regions (China, India, Middle East) continue to invest heavily in modern capacity and have increasingly integrated refinery petrochemical complexes.

• WoS regions (Europe, North America) face increasing closures, weaker demand, and higher operational costs.

This divergence has already begun shifting global product flows. For example, EoS producers are increasingly supplying deficit regions in the West, altering trade routes, freight economics, and margin dynamics. The result is an increasingly interconnected market where regional imbalances quickly influence global margins.

Changing Product Demand Reshapes Margin Dynamics

Refining margins are ultimately shaped by the value of specific products, and our analysis reveals several pivotal shifts:

• Petrochemical feedstock demand is surging in Asia, driven by long-term investment in plastics, polymers, and chemical derivatives.

• Gasoline and diesel demand are declining in WoS markets, pressured by efficiency gains, EV adoption, and regulatory constraints.

• Jet fuel demand remains resilient across all regions, with aviation recovery providing stable long-term uplift.

These transitions challenge refiners to realign their product slates. Complex refineries with high conversion capacity and integrated chemical output will be better positioned to capture new value streams, while simpler plants may struggle to adapt economically.

The Decarbonisation Agenda Adds Uncertainty

Decarbonisation remains one of the most powerful forces shaping the future of refining. FGE NexantECA research shows that ESG-related regulations and emissions mandates are accelerating, adding significant cost and strategic complexity.

Yet, the pathways to compliance are far from clear:

• Technologies such as carbon capture, hydrogen integration, and advanced biofuels are still in varying stages of maturity.

• Regional policy frameworks differ substantially, leading to uneven investment environments.

• Cost burdens will likely widen the gap between best in class and vulnerable assets.

This policy driven uncertainty is itself a source of margin volatility, influencing capital allocation, operating decisions, and long-term strategic planning.

Strategies for Navigating the Next Decade

To thrive in this post boom era, refiners must adopt a more dynamic and forward-looking strategy. Based on our insights, the following priorities will be essential:

1. Build Margin Resilience

Refiners must strengthen operational flexibility by diversifying crude slates, optimising unit utilisation, and adopting more sophisticated hedging aligned with emerging volatility patterns.

2. Accelerate Operational Transformation

Energy efficiency, automation, digital twins, and predictive maintenance will be key tools for reducing operating costs and improving reliability amid uncertain margins.

3. Align with Evolving Product Demand

Focusing on petrochemical feedstocks, aviation fuels, and specialty products can help maintain profitability as traditional fuels stagnate.

4. Embrace a Realistic Decarbonisation Pathway

Rather than chasing every emerging technology, refiners must prioritise solutions aligned with asset configuration, regional policy incentives, and customer demand trends.

Conclusion: A Volatile but Opportunity Rich Decade Ahead‑Rich Decade Ahead

The next decade will not mirror the extraordinary margin highs of the recent past—nor should refiners expect stability. Instead, volatility will be the defining feature of the post boom era. Yet, as our analysis makes clear, this environment is navigable for companies prepared to adapt, invest wisely, and pivot strategically. Those who understand the new drivers of margin behaviour—and respond with agility—will be best positioned to capture value in the decade ahead.

Ready to Navigate the Next Decade of Refining?

The margin landscape is shifting fast — and the refiners who win will be those equipped with the right insights at the right time.
Our Annual World Refining Outlook provides the data, forecasts, and strategic analysis you need to stay ahead of global capacity shifts, evolving product demand, and rising decarbonisation pressures.

Request a demo of our Annual World Refining Outlood today!

About Us - FGE NexantECA is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms.  Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies, and economics, FGE NexantECA provides solutions that our clients have relied upon for over 50 years.