Why Refineries Are Worth More Than Oil Fields
The real source of oil wealth is not underground — it’s inside the refinery
There is a deeply rooted belief:
The value of an oil company depends on how many barrels it holds in reserves.
It feels intuitive.
It sounds logical.
And financially, it is wrong.
Oil underground is not wealth.
It is only potential inventory.
Wealth appears only when that barrel enters an industrial system capable of transforming it.
And that system is not the oil field.
It is the refinery.
The closest lesson: Costa Rica
A nearby example makes this clear.
In Costa Rica there is a company whose name perfectly captures the idea: the Costa Rican Petroleum Refining Company (RECOPE). Yet the country stopped refining crude more than a decade ago. After closing its industrial operations, the company went from being — by revenue — one of the largest economic entities in Central America, comparable to regional banks, airlines, and even the Panama Canal Authority, to essentially a fuel importer and distributor.
The oil kept arriving.
But the value added disappeared.
And with it, its relative economic weight.
The lesson is direct:
when an energy company stops transforming the barrel, it also stops capturing energy rent.
Oil does not have its own price
Markets speak of “the oil price” as if it were a homogeneous product.
But oil does not really have a universal price.
It has a conditional value.
The same barrel can:
• be highly profitable in a complex refinery
• become an economic problem in a simple refinery
The difference is not geological.
It is industrial.
That is why two countries with similar oil can have radically different revenues.
They do not compete in producing.
They compete in processing.
The secret: the crack spread
The real income of the oil system does not come from the barrel.
It comes from the refining margin.
The refiner buys crude and sells:
• gasoline
• diesel
• jet fuel
• petrochemicals
The value of those products minus the cost of crude is the true oil business.
That margin is called the crack spread.
Here lies the central point:
The producer depends on price.
The refiner manages margin.
Financially, it is the difference between:
• a cyclical asset
• an industrial asset
What markets actually value
When investors analyze energy companies, they are not buying barrels.
They are buying cash-flow stability.
An oil field:
• naturally declines
• requires constant investment
• depends on international prices
• is highly volatile
A refinery instead:
• processes different crudes
• optimizes blends
• exploits quality discounts
• generates margin even with cheap oil
This completely changes valuation.
Upstream is a commodity price bet.
Downstream is an operating business.
Markets pay more for operations than for uncertainty.
The energy paradox
Here appears one of the sector’s great paradoxes:
a country can discover a giant oil field…
and its economic risk increases.
Because fiscal revenue becomes more exposed to the oil price cycle.
Meanwhile, an economy with strong refining capacity may benefit even when oil prices fall:
• when crude drops, the producer earns less
• the refiner improves margins
Refining acts as a macroeconomic stabilizer.
Global refining in 2026
By 2026, the world energy geography confirms the idea.
China has consolidated itself as the largest refining system on the planet, with capacity close to 18.5 million barrels per day, surpassing the United States.
The United States remains central, with about 132 operating refineries and roughly 18.4 million barrels per day of capacity.
Total global refining capacity is near 105 million barrels per day.
Recent growth is concentrated in Asia and the Middle East:
• Jamnagar (India), one of the world’s largest refining complexes
• Dangote (Nigeria), designed to transform West Africa’s energy economy
Global energy power is shifting toward those who process oil, not those who merely produce it.
Heavy crude
This is even clearer with heavy crudes.
Without complex refining:
• they trade at large discounts
• require diluents
• face limited markets
Inside a deep-conversion refinery the opposite occurs:
the crude discount becomes a competitive advantage.
The refiner buys cheap and sells fuels at market prices.
The refinery does not suffer crude quality.
It monetizes it.
Caribbean & Central America: loss of transformation
The Caribbean region illustrates what happens when industrial capacity disappears.
Historically refineries operated in Curaçao, Aruba, Jamaica, and the Dominican Republic, with nominal capacity near 600,000 barrels per day. Today actual operation is far lower due to technical problems and lack of investment.
Examples:
• Isla Refinery (Curaçao): nominal 335,000 b/d, often well below capacity
• Cienfuegos (Cuba): ~65,000 b/d
• Refidomsa (Dominican Republic): ~34,000 b/d
Central America — including Costa Rica and Nicaragua — stopped operating refineries in the 21st century.
The region imports virtually 100% of the fuels it consumes.
Panama instead evolved into a logistics hub for storage and interoceanic hydrocarbon transport.
The result is clear: the Caribbean stores energy… but transforms less and less of it.
So what is an oil company?
An integrated oil company is not an extraction business.
It is an industrial energy-transformation company.
Upstream secures supply.
Downstream secures profitability.
That is why the majors never abandoned refineries.
They were not the past of the business.
They were its financial insurance.
The financial implication
In corporate finance terms:
• reserves determine potential
• refining determines cash flow
Markets do not value potential.
They value flows.
That is why companies with fewer reserves can be worth more than countries with enormous natural resources.
It is not geology.
It is business model.
The real oil wealth
Oil wealth does not depend on how much oil you have.
It depends on how much of the barrel’s value you capture.
If you only produce crude, you capture the beginning of the chain.
If you refine, you capture value added.
If you market fuels, you capture the full energy rent.
The oil business is not finding oil.
It is controlling its transformation.
Conclusion
The field is the origin of the barrel.
The refinery is the origin of money.
That is why major energy companies never competed only for reserves.
They competed for integrated systems.
The modern energy market does not reward the owner of the resource.
It rewards the operator of the process.
And in that difference lies why some nations with enormous reserves remain economically volatile, while others — without their own oil — build stability around energy.
Because in oil, the real competitive advantage is not underground.
It is inside the refinery.
With this installment we close the energy economics series published in Finanzas Felices (English) and Feliz y Saludable (Spanish).
San José, Costa Rica — February 19, 2026
Rafael Vilagut Vega, vilagutvrafael@gmail.com
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