Whilst my constituency is located on the Humber, a world-renowned location for the offshore and renewable energy sector, I recently led a debate in Parliament on the future of the UK’s oil refining sector. This is because, up until developments earlier this year, the Humber could also boast of producing a third of the UK’s refined fuel, with two of the six existing major oil refineries in the UK being based in the Humber.
Sadly, as we approach the end of 2025, there are only four operational refineries remaining in the UK. This follows the closure of Grangemouth in Falkirk, with 400 job losses, and the uncertainty at Lindsey Refinery, based in my constituency.
As mentioned previously, the Humber is full of opportunity for offshore and renewable energy and will play a significant role in the UK’s Net Zero efforts. However, we must not overlook the UK’s carbon energy needs as we make the transition to cleaner energy sources.
We must face the fact that a significant portion of our total energy consumption still comes from oil, gas and coal. To put this into perspective, the UK’s total primary energy consumption is around 130-140 million tonnes of oil equivalent (Mtoe) annually, with fossil fuels making up roughly 79-81% of this in 2022-3.
Sadly, most people do not appreciate the importance of oil refineries. Yet, the UK oil refining sector is a vital part of the UK’s energy security, and a number of our crucial sectors are reliant on it, including transport, industry and defence. They produce products which are essential for our critical energy needs: petrol, diesel, jet fuel and fuel oil. Lindsey, for example, has a capacity equivalent to around 35% of British petrol consumption and 10% of British diesel.
Yet, refinery output in 2024 was 48 million tonnes, which is 55% below the 1973 peak. Output in 2024 was around 14% below levels from the late 2010s and more than 40% below output from the start of the century. This should worry us as refineries supply 47% of the UK’s final energy demands – as 100% of aviation, 97% of road and 61% of rail all still rely on liquid fuels
Refineries also support 100,000+ jobs across the UK, with 4,000 directly in refineries. We also collect £37 billion annually in tax revenues (duty + VAT) from our refineries and they are among the lowest-carbon refineries globally.
Yet, despite their importance, this year has seen the closure at Grangemouth and the uncertainty at Lindsey. Oil refineries are facing significant challenges. For example, energy is the single largest cost of operating a refinery the industry faces, and high energy and carbon costs negatively impact the competitiveness of UK refineries in the global market. UK refineries are therefore competing with rivals who pay little or nothing in carbon costs.
Our route to lower emissions must not come at the price of deindustrialisation or at the expense of our energy security. Moreover, our climate targets are still some way off, so in the meantime we must continue to rely on the products that refineries produce.
We must also realise that closing UK refineries does not reduce demand, it merely shifts production abroad. This of course often leads to higher emissions, thereby both exporting jobs outside the UK whilst also failing in our efforts to cut emissions. Moreover, once a refinery closes, it does not return as skills, infrastructure and investment are lost permanently.
One thing that can be done to help is expanding the scope of the carbon border adjustment mechanism to include oil refineries’ products. The CBAM is a tax levied on goods at the border based on their carbon content. Expanding the CBAM to products from oil refineries based overseas would enable domestic oil refineries to remain competitive.
The UK emissions trading scheme is another issue that needs to be resolved. Refining receives substantially lower free allowances under the scheme compared with other industries, such as steel and cement, and ETS costs are one of the highest expenditures in a refinery’s operating budget. Competitors in other regions do not face those costs, which seriously damages the competitiveness of UK refineries.
As I said during my debate, the future of not just Lindsey Oil Refinery is at stake, but that of the whole oil refining sector. The Government must review their current position and act to secure the industry for the future.
Failure to protect the UK’s oil refining capacity threatens our energy security and key industries
