Valero Energy (NYSE:VLO), the largest U.S. refiner, expects 2016 to be a strong year. Unlike traditional oil companies such as Chevron (NYSE:CVX) which are being punished by declining crude prices, Valero and other refiners are awash in cash. This is partly because crude is cheaper to refine these days but also because the refiners are becoming more nimble with operations by using sensors, wireless networks and computer algorithms to most accurately meet demand.
During a conference call last month, Valero’s Senior Vice President of Supply, International Operations & Systems Optimization Gary Simmons described, in response to a question, how the company’s quality refining assets allow it to adapt to the most lucrative types of oil at any given time.
“I think as you move to 2016, as long as we're in this market that the crude markets are oversupplied, you're just going to see a lot of volatility between the grades. And so we are just going to be responsive. As the markets move, we'll run the diet that is most economic in our refineries.” Valero was not available for further comment at the time of publication.Valero is among the many energy companies that can swiftly shift its systems to capture real-time market trends.
“The refiners have traditionally been quite a bit ahead, particularly with things that optimize an individual plant,” said Gregory Bean, Oil and Gas Director at Deloitte Consulting during an interview with FOXBusiness.com.
Bean, who helped author Deloitte’s ‘Connected Barrels’ report, examined how the oil and gas industry can adapt to what is described as the “new normal of lower oil prices.” Deloitte's team notes the current economics of commodities will “push even the efficient ones [companies] to find ways to preserve their top and bottom lines.”
Bean notes new technology, which tends to be “less capital intensive,” can be particularly beneficial when it comes to energy product management.
The ability to implement new technology is especially key for smaller and medium sized refiners says Jeff Hazle, Senior Director of Refining Technology at American Fuel & Petrochemical Manufacturers (AFPM) a trade association representing high-tech American manufacturers of virtually the entire U.S. supply of energy.
During an interview with FOXBusiness.com, Hazle noted how computing techniques are being used throughout the industry in key segments including product management. “It can help you decide what crude to purchase and how to optimize it.”
As more companies implement Internet of Things’ technologies, the payoff could be huge, boosting global gross domestic product by as much as 0.8% or $816 billion during the next decade according to Oxford Economics as cited in Deloitte’s report. “Even beyond refining, if every heavy industrial plant could increase their uptime it’s a huge benefit.” said Bean.