European oil refinery capacity is set to shrink by a fifth over the next decade even as the continent's facilities operate near limits due to the energy crisis from the Iran war. S&P Global Energy forecasts processing in Europe will drop by 20% to just over 9 million barrels per day (b/d) by 2035, down from 14 million b/d at the century's start. In the US, a 7% decline to 16.7 million b/d is expected. Despite government calls for greater capacity, investors show little interest in new projects. Daniel Evans of S&P Global notes the war's shock hasn't altered long-term fundamentals. Refineries in the US and Europe run close to capacity amid Middle East war shortages, earning high profits. Meanwhile, China, the Middle East, India, and Africa expand their refining sectors. Electric vehicle growth further reduces fuel demand, with EV sales rising 63% in France and 48% in Germany in early 2024. While governments may temporarily protect vulnerable plants, older, smaller refineries face closure. Dev Sanyal of Varo Preem emphasizes strategic long-term thinking, noting recent European closures increased dependence on imported fuels. Refinery owners need investment certainty, as major turnarounds often determine ageing plants' futures. Alan Gelder of Wood Mackenzie highlights that maintenance costs can lead owners to abandon unprofitable facilities.

In the US, Donald Trump has announced plans for the first major new refinery in five decades in Texas and pushed for restarting the Saint Croix refinery in the US Virgin Islands.