Pipework on the Humber Refinery, operated by Phillips 66, and the Humber estuary close to South Killingholme, north-east England on March 11, 2026.
Oli Scarff | Afp | Getty Pictures
This report is from this week’s CNBC’s UK Trade publication. Like what you see? You may subscribe right here.
The dispatch
If Britain ought to have realized one lesson from the pandemic and Russia’s subsequent invasion of Ukraine, it’s the significance of safety of provide, whether or not in meals, vitality, fertiliser or different commodities.
The Center East disaster suggests it was not.
Poor provide chain resilience might quickly result in shortages in refined oil merchandise and, particularly, diesel and jet gasoline (kerosene).
That is due partly to a giant drop in refining capability. As just lately because the Seventies, the U.Okay. boasted as many as 18 refineries, however this has fallen sharply and extra quickly than in nations like France and Germany.
In response to the Home of Commons Library, U.Okay. refinery output fell by 41% between 2000 and 2024, with BP and Shell, the massive two native oil majors, exiting the market by 2011.
These closures mirror numerous components, together with poor funding returns, a scarcity of presidency help for refinery upgrades and better carbon and vitality prices. The relative smallness of U.Okay. refineries (greater refineries, benefiting from economies of scale, are extra aggressive) and decrease demand for some merchandise as Britain pushed extra aggressively in direction of net-zero and the roll-out of electrical automobiles additionally performed a task.
Following the closures final yr of the Prax Lindsey refinery in Lincolnshire and the Petroineos refinery at Grangemouth in Scotland, Britain now has simply 4: Fawley in Hampshire, operated by Exxon Mobil; Humber in Lincolnshire, operated by Phillips 66; Pembroke in south Wales, operated by Valero Vitality and Stanlow in Cheshire, operated by Essar.
This quartet provides round 85% of the U.Okay. market’s wants. In some merchandise, Britain stays self-sufficient, most notably petrol. It’s one in every of simply 16 OECD nations having fun with petrol self-sufficiency — even when it’s a web importer of the crude oil wanted to provide the stuff.
That isn’t the case, nonetheless, with kerosene and diesel, the place Britain is a web importer.
In response to Fuels Trade U.Okay., the commerce physique for the downstream business, Britain imported 3.1 instances as a lot kerosene because it produced in 2024 and a couple of.5 instances as a lot diesel (wherein it was self-sufficient as just lately as 2011). The dependence on imported kerosene is longer established however has risen because of refinery closures.
The kerosene drawback
Extra problematic is kerosene. Because of Heathrow Airport, a serious worldwide aviation hub, Britain was — based on the federal government — second solely to the U.S. amongst OECD nations for jet gasoline demand in 2024. Some 60% of Britain’s kerosene imports come from Saudi Arabia, the United Arab Emirates and Kuwait (with 38% from the latter alone), which is why the closure of the Strait of Hormuz is so crucial.
Worse nonetheless, Britain’s kerosene stockpiles are very low — only one month’s price of provides — in contrast with a lot of the remainder of the world.
The disaster has supplied a wealthy seam for the federal government’s critics. The Scottish Nationwide Get together, for instance, has blamed Westminster for permitting Grangemouth — which provided all of Scotland’s kerosene — to shut.
Ministers insist that, with kerosene provides from the Netherlands and the Belgian hub of Antwerp remaining uninterrupted, there is no such thing as a threat of rationing as some Asian nations are already doing.
Nevertheless, with European kerosene costs having doubled, air fares are prone to rise this summer time whereas airways minimize capability.
On the intense facet, if that forces extra individuals to vacation at house this summer time, that ought to no less than present a possibility for Britain’s hard-pressed hospitality sector.
Have to know
UK ‘not supporting’ U.S. Iran blockade as France’s Macron confirms ‘multinational’ talks on the Strait of Hormuz
The U.Okay. was one of many first nations to declare it isn’t getting concerned within the blockade on Iranian ports.
Why stress is mounting at oil big BP forward of its annual common assembly
BP is bracing for a attainable shareholder revolt at its annual common assembly.
OpenAI broadcasts first everlasting London workplace after halting UK Stargate mission
In February, the corporate mentioned it will make London its largest analysis hub exterior of the U.S.
— Holly Ellyatt
Coming Up
APR 16: UK GDP for February
APR 21: UK unemployment price for February
APR 22: UK inflation price for March
