Europe Oil Refining Market Outlook, 2030

The oil refining market in Europe has undergone significant transformation over the decades, shaped by historical developments, evolving demand patterns, stringent environmental regulations, and shifts in energy policy. Post-World War II industrialization led to the establishment of large-scale refineries across Europe, particularly in countries like Poland, Italy, Germany, and the UK. Europe has seen several refinery closures or conversions like the Grangemouth facility in the UK which are now shifting toward terminals or renewable fuel production. Demand for refined petroleum products in Europe remains dominated by diesel, gasoline, and aviation fuels, with diesel accounting for over 40% of regional demand due to reliance on heavy-duty transport and industrial machinery. Companies like Shell and TotalEnergies actively promote their investments in sustainable aviation fuel (SAF) and carbon reduction technologies as part of their branding. The European Union has implemented strict emissions caps, carbon pricing mechanisms, and renewable energy mandates. Refineries must comply with Euro 6 fuel quality standards, low-sulphur requirements, and certification systems for biofuels that verify feedstock traceability and lifecycle emissions. The EU’s Carbon Border Adjustment Mechanism (CBAM) is set to raise import costs for carbon-intensive products, challenging traditional refining operations further. In the UK, refiners face comparatively higher carbon taxes and less government support than EU counterparts, pushing many facilities to scale down or shut. The Stanlow refinery in the UK, for instance, is undergoing a £2.25 billion transformation into a hydrogen-ready, sustainable energy facility. In April 2025, Due to overcapacity in the European petrochemical market and the non-renewal of a major ethylene contract, TotalEnergies plans to shut down its oldest steam cracker in Antwerp by the end of 2027. At the same time, the company is channeling investments into a 200 MW green hydrogen production facility. Of this, 130 MW has already been contracted with Air Liquide, enabling the production of 15,000 tonnes of green hydrogen annually for on-site use.

According to the research report, ""Europe Oil Refining Market Outlook, 2030,"" published by Bonafide Research, the Europe Oil Refining market is anticipated to add to more than USD 125.24 Billion by 2025–30. The market is the continued demand for transportation fuels especially diesel, gasoline, and jet fuel which remain essential to Europe’s mobility, trade, and logistics systems despite the rise of electric vehicles. For instance, diesel accounts for nearly half of Europe’s fuel consumption, especially in countries like Germany, France, and Italy where diesel vehicles and freight transport dominate. Additionally, aviation recovery post-pandemic has led to a noticeable increase in jet fuel demand, particularly in key hubs like the UK, Germany, and the Netherlands. Europe has some of the most demanding regulations globally, including the EU’s Renewable Energy Directive (RED II), Fuel Quality Directive, and the Carbon Border Adjustment Mechanism (CBAM). These rules encourage investments in cleaner production processes, including hydrocracking, desulphurization, and carbon capture technologies, thereby opening growth pathways for companies that adapt early. Refineries in Italy (like ENI’s Venice and Gela facilities) have already transformed into bio-refineries, highlighting the region’s potential for green growth. For example, Europe’s efforts to reduce dependency on Russian oil post-2022 have created new openings for domestic refining and alternative import channels, including from the U.S., the Middle East, and Africa. Investments are also flowing into hydrogen infrastructure, with countries like Germany and the Netherlands investing heavily in blue and green hydrogen production linked to refining hubs. Refineries are embracing AI, IoT, and predictive analytics to optimize operations, reduce emissions, and improve safety, which contributes to cost-efficiency and competitiveness in a tight-margin industry. Supporting events such as government incentives, EU Green Deal funding, and public-private partnerships are crucial in accelerating this transition. For instance, the European Commission has pledged billions under the “Fit for 55” plan to decarbonize industries, including refining. In May 2023, Rosneft, the prominent Russian energy corporation, unveiled its intentions to join forces with state-owned Indian refineries to initiate the construction of a new refinery within India. This strategic move comes in the wake of alterations made to the previously proposed USD 44-billion refinery project situated along India's western coastline, a project led by India's government-run refining entities.

Market Drivers

• Rising Demand for Low-Emission and Cleaner Fuels: A major driver of the European oil refining market is the increasing demand for low-emission and cleaner fuels due to the continent’s strong environmental consciousness and regulatory frameworks. As countries move toward their net-zero targets, there's a growing market for ultra-low sulfur diesel, biofuels, and cleaner transportation fuels. European refineries are investing in hydrocracking and desulfurization technologies to meet these evolving fuel quality standards. The demand for marine fuels that comply with IMO 2020 sulfur limits and the EU's broader decarbonization goals further strengthens the need for refined products with lower environmental impacts.
• Strategic Importance of Energy Security: Europe’s geopolitical landscape, particularly in the wake of the Russia-Ukraine conflict, has underscored the importance of refining capacity in ensuring energy independence and supply security. As the region reduces its reliance on Russian crude and refined products, domestic refining has become vital in maintaining stable fuel supplies. This has prompted policy shifts and strategic investments in existing refineries, particularly those located near key ports and trade routes, to bolster Europe’s energy resilience and mitigate import risks from politically unstable regions.

Market Challenges

• Overcapacity and Low Margins in a Competitive Market: Europe faces the challenge of structural overcapacity in its refining sector, especially as fuel demand declines due to increasing EV adoption, energy efficiency, and climate policies. Many European refineries are small or medium-sized and cannot compete with newer, more complex mega-refineries in Asia and the Middle East, leading to squeezed profit margins. As a result, several facilities have been shut down or repurposed in recent years, with operators struggling to maintain competitiveness while facing high regulatory and operational costs.
• Stringent Environmental Regulations and Decarbonization Pressure: The European refining industry is under intense pressure to comply with some of the world’s most ambitious climate policies, including the EU Green Deal, the Emissions Trading System (ETS), and the Renewable Energy Directive (RED II). Refineries are required to significantly cut carbon emissions, adopt cleaner production technologies, and integrate renewable feedstocks. Meeting these regulations involves substantial capital expenditure and operational changes, which can be especially burdensome for older facilities. Failure to comply not only results in fines but also reputational risks and market exclusion.

Market Trends

• Accelerated Transition Toward Renewable Fuels and Hydrogen: A dominant trend in the European oil refining sector is the accelerated shift toward renewable fuels, including biodiesel, renewable diesel, and sustainable aviation fuel (SAF). Many refineries are being converted into bio-refineries or hybrid facilities capable of processing both fossil and renewable feedstocks. In addition, there's rising investment in green hydrogen production as a cleaner energy vector for refining processes. These transformations are being supported by EU funding mechanisms and carbon reduction incentives, making them central to the industry's future.
• Refinery Closures and Portfolio Optimization: Driven by low margins, declining demand, and the high cost of environmental compliance, a growing number of European refineries are being shut down or sold. Oil majors are streamlining their portfolios by closing inefficient sites and investing in fewer but more sustainable and high-value assets. Some are transforming traditional refineries into energy hubs focused on biofuels, hydrogen, and circular economy solutions. This trend reflects a broader industry realignment toward sustainability and economic viability in a carbon-constrained world.

Fuel oil is moderately growing in Europe’s oil refining industry due to its continued use in marine bunkering and industrial heating despite growing environmental regulations and decarbonization efforts.

Fuel oil demand in Europe’s oil refining industry is experiencing moderate growth primarily due to its sustained relevance in specific sectors like marine bunkering and industrial heating, even as the region aggressively pursues decarbonization. The maritime sector, governed by the International Maritime Organization (IMO) regulations such as the IMO 2020 sulfur cap, has driven refineries to shift production towards low-sulfur fuel oil (LSFO) and very low sulfur fuel oil (VLSFO). European ports like Rotterdam, Antwerp, and Hamburg remain major hubs for marine fuel supply, thereby ensuring that a segment of the refining industry continues to produce and upgrade fuel oil to meet compliance standards. Additionally, in Eastern and some parts of Southern Europe, industrial facilities and power generation plants continue to rely on fuel oil as a backup or secondary source of energy, especially in regions with less reliable access to cleaner energy infrastructure. While natural gas and renewables are rapidly replacing fuel oil in many Western European countries, certain seasonal and geopolitical factors such as disruptions in gas supply due to the Russia-Ukraine conflict have led to temporary increases in fuel oil use for energy security and grid stability. Furthermore, European refiners are leveraging fuel oil as a residual product in increasingly complex refineries where heavy crude is still processed, and secondary conversion units like hydrocrackers and cokers allow flexibility in balancing product yields, including fuel oil. At the same time, stricter environmental policies and the EU’s Fit for 55 package are putting pressure on high-carbon fuels, which moderates the long-term growth outlook.

Road transportation is the largest application type in Europe’s oil refining industry due to the region’s extensive vehicle fleet, strong freight and logistics sector, and continued reliance on refined petroleum products like diesel and gasoline for mobility.

Road transportation dominates the application segment of Europe’s oil refining industry primarily because of the region's large and aging internal combustion engine (ICE) vehicle fleet, extensive freight movement by road, and the ongoing consumption of refined fuels such as diesel and gasoline. Despite the EU’s ambitious targets for carbon neutrality and the rise of electric vehicles (EVs), the majority of Europe’s passenger cars, commercial vans, and heavy-duty trucks still operate on liquid fuels. Diesel, in particular, has long been favored in European markets for both private and commercial transport due to its fuel efficiency and government tax incentives that persisted for years. Additionally, road freight remains the backbone of intra-European trade, especially across landlocked countries and industrial zones where rail infrastructure is less developed or underutilized. This logistics dependency on trucking ensures steady demand for diesel and related fuel products. Even though alternative fuels and electrification are making inroads, these transitions are gradual and uneven across the continent, with Western Europe leading in EV adoption while Eastern and Southern Europe lag due to cost and infrastructure constraints. Furthermore, biofuel blending mandates and energy efficiency improvements have helped sustain the relevance of traditional fuels in a more environmentally conscious form, thereby supporting refining operations geared toward road transportation. Government incentives for cleaner fuels, including Euro 6/VI standards and biofuel quotas under the Renewable Energy Directive (RED II), have also prompted refiners to invest in advanced refining technologies and fuel formulations rather than fully shift away from road fuel production.

Biomass is the largest feedstock type in Europe’s oil refining industry due to strong policy support for renewable energy, ambitious climate targets, and the widespread integration of bio-based inputs in fuel production.

Biomass has emerged as the largest feedstock type in Europe’s oil refining industry largely because of the European Union’s aggressive decarbonization agenda, which includes stringent renewable energy mandates, carbon neutrality goals, and a strong push toward sustainable fuel alternatives. The Renewable Energy Directive (RED II and its upcoming RED III update) requires increasing shares of energy from renewable sources in transport, thereby compelling refiners to adopt biomass-based feedstocks such as used cooking oil (UCO), animal fats, and agricultural residues in their operations. These bio-based materials are increasingly being co-processed or exclusively refined in hydrotreated vegetable oil (HVO) plants or renewable diesel facilities across Europe. Countries like the Netherlands, Finland, Sweden, and Germany have led the way in scaling up bio-refining capacities, with major players such as Neste and TotalEnergies investing heavily in renewable feedstock infrastructure. Biomass feedstocks are seen as a pragmatic way to decarbonize existing refining assets without dismantling the liquid fuel supply chain, especially for sectors like aviation, maritime, and heavy transport where electrification is challenging. Moreover, Europe's sustainability criteria, including life cycle emissions accounting and traceability requirements, have favored advanced biofuels derived from waste biomass rather than food crops, aligning with circular economy principles. This shift has not only reduced dependence on fossil-based crude oil but also stimulated a domestic and regional supply chain for waste-derived biomass feedstocks.

Hydro-skimming complexity type is moderately growing in Europe’s oil refining industry due to its cost-effective adaptability for producing cleaner fuels and meeting regional demand in smaller or less industrialized markets.

The moderate growth of hydro-skimming complexity type in Europe’s oil refining industry is primarily driven by its strategic role as a flexible and cost-efficient refining configuration, particularly in regions where large-scale, high-complexity refineries are not economically viable. Hydro-skimming refineries, which are essentially simple topping units upgraded with catalytic reforming and hydrotreating capabilities, provide a balanced output of light and middle distillates with improved fuel quality. These refineries are particularly suited to meet the demand for gasoline and diesel while ensuring compliance with stringent European fuel standards, such as the Euro VI emissions regulations. In smaller EU nations or regions with declining crude throughput and lower energy demand, hydro-skimming offers a practical solution to maintain local fuel supply without requiring the heavy capital investment needed for deep conversion or integrated refining complexes. Additionally, with Europe’s refining sector under increasing pressure from decarbonization mandates, many older, less complex topping units are either being upgraded to hydro-skimming configurations or reconfigured to co-process renewable feedstocks. This is especially relevant in the context of adapting to the Renewable Energy Directive (RED II/III), where refiners are required to reduce the carbon intensity of their products. Hydro-skimming refineries, by incorporating mild upgrading technologies, can efficiently blend bio-components or process lighter, low-sulfur crudes, thus aligning with environmental goals at a manageable cost.

Russia leads the European oil refining industry primarily due to its vast domestic crude oil reserves, extensive refinery network, and strategic role as a major supplier of refined products to both domestic and export markets.

Russia’s dominance in the European oil refining industry is rooted in its massive crude oil production capacity, long-established refining infrastructure, and strategic geographic positioning that enables it to serve both domestic demand and export markets across Europe and Asia. As one of the world’s top crude oil producers, Russia possesses an abundant supply of oil, which feeds directly into its network of over 30 refineries. These facilities are spread across the country and are integrated with pipelines, railways, and seaports, making logistics highly efficient and cost-effective. Refineries like Rosneft’s Angarsk and Gazprom Neft’s Omsk are among the largest and most technologically advanced in Europe, capable of processing various grades of crude and producing high-value refined products such as diesel, gasoline, jet fuel, and petrochemicals. Russia’s refining sector has historically been driven by state-backed energy giants like Rosneft, Lukoil, and Gazprom Neft, which have invested heavily in modernization projects to improve efficiency, product quality, and environmental standards. These upgrades were critical in aligning Russian fuel output with European specifications, particularly the Euro-5 standard for cleaner fuels, thereby boosting export potential. Russia’s role as a key energy supplier to Europe even amid political tensions has reinforced its influence over the region’s refining dynamics. Before the geopolitical shifts post-2022, Russia exported significant volumes of refined products and crude to the European Union. While recent sanctions and trade realignments have altered these flows, Russia has adapted by redirecting exports to Asia, the Middle East, and Africa, while continuing to serve domestic needs through its large-scale refineries.

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