In a sign of how weak the economy is and how weak demand continues to erode refiner margins, Valero today announced it's closing its 210,000bpd plant in Delaware City, DE.

This is now the second U.S. refinery to shut its doors in November- the Western Refinery facility in New Mexico also intends to shut its 190,000bpd plant in Bloomfield.



While the news can temporarily help push oil and gasoline prices lower on "verification" that demand is low, and margins are negative, the long term outlook is that these plants will be well-needed if and when the U.S. economy makes a strong recovery. A key ingredient to positive growth after a recession has been affordable energy. If demand ever recovers, there will be less capacity to refine oil into sought after products, such as gasoline and diesel fuel.

It was just two years ago that many refineries were planning large expansions, but many of those plans were canceled as oil prices collapsed a year ago.

This certainly will not be the last plant closure either- there are many smaller facilities that have a risk for closing. It seems that the industry is focusing more on larger refineries in strategic locations that have more flexibility.

Valero is the largest refiner, by capacity, in the United States.