Silos: Getting Away from Refining vs. Marketing

Downstream energy organizations encompass two wildly different sectors: refining and marketing. In some cases, these differences can create an “us versus them” mentality – which leads to less efficiency and lower profitability overall. Refiners turn raw crude oil into usable products (such as gasoline and diesel) at crude oil refineries, which from the outside look like masses of huge vertical tubes, pipes, steam and (sometimes) noise – an otherworldly environment literally fenced off from the rest of us. The clouds coming out of refineries are almost always harmless pure water vapor, but can look threatening to local communities and residents. Marketers take those products and move them to various markets, from large bulk sales via pipeline to individual product truckloads heading to your local gas station. They work directly with retail outlets such as fueling stations, convenience stores, travel centers, warehouse club outlets, and other petroleum product retailers. Both refiners and marketers have important jobs to do, and they work tirelessly to bring massive volumes of expensive products to market in a safe and responsible manner. However, in many organizations it can feel like “R vs. M” instead of “R&M.” Too many times, we have observed client professionals treat the “other” side in ways that border on hostile – even though they are ostensibly on the same corporate team. Some companies appear to value refiners over marketers, and others favor marketers over refining. For example, in some cases refineries make too much of specific products for a particular market – then effectively force the marketers to find a home for those barrels, lowering price if necessary. In other cases, marketers sell too aggressively into markets, leading to product stockouts and forcing refiners to make additional volumes of marginal products. Future articles will go into more detail as to why this occurs, but bringing R&M together – leveraging both of their strengths – is a key challenge for downstream organizations going forward.