# Four refineries and a deadline

_Britain refines 30% of the jet fuel and 49% of the diesel it uses, from four refineries left of the 18 that were operational in the 1970s. On 1 January 2027 the licence that lets us import fuel made from Russian crude expires. The volumes are small but that is not the point._

Neil Woodford · 26 August 2026 · 10 min read

![Oil refinery](https://cdn.sanity.io/images/v3acfbvo/production/a26132da37dc4de391182acd0cc1ca7bbafb61a1-2592x1896.jpg?w=1600&fit=max&auto=format)

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Several weeks ago I wrote about [Ed Miliband's reported willingness to wave Jackdaw through](https://www.noisecancelling.co/read/fool-me-once) after years of describing North Sea drilling as climate vandalism, and about the chancellorship he appeared to be trading it for. He did not get it. John Healey did. Mr Miliband has the Foreign Office and Miatta Fahnbulleh, his former deputy, has energy. 

The first act of Andy Burnham's premiership was to take VAT off domestic electricity from 1 October: 5% to zero, worth about £45 a year to a typical household and £850m to the Exchequer, but for only six months.

_[Embedded media](https://www.bbc.com/news/articles/ce85ld3y4rlo)_

I have little against the £45 beyond what it reveals. VAT on energy is a tax households pay, and businesses reclaim. Removing it does nothing at all for the factory, the refinery or the data centre. It is a cost-of-living measure, not an energy policy, and updated forecasts for the October price cap increase have more than erased it within a few weeks of the announcement.

I have made the argument about British electricity prices twice this summer, [once on the gap between what we pay for gas and what we pay for power](https://www.noisecancelling.co/read/fool-me-once) and [once on why administered markets in this country are those characterised by high inflation](https://www.noisecancelling.co/read/regulated-and-unaffordable). I will not make it a third time. However, there is a different problem, with a date attached to it, and like so many others, it has had little attention.

## The licence that expires on 1 January 2027

_[Embedded media](https://www.bbc.com/news/articles/ceqdl8xre7qo)_

On 20 May the UK banned imports of oil products refined from Russian crude in third countries, closing a gap through which more than £4bn of jet fuel and other refined products, principally routed through India, had continued to arrive in the UK. On the same day the Department for Business and Trade published a general licence carving out the two products that made up almost all of the refined product: diesel and jet fuel. On 12 June, the government confirmed that the licence expires on 1 January 2027 and is reviewed fortnightly, with the intention of lifting it sooner.

There is a moral objection to this, and I do not want to skate over it. The licence keeps British money flowing, indirectly, to a regime still waging war on Ukraine, and it sits badly against everything this country has said and spent in support of Kyiv. 

The government's answer, I assume, is that the alternative was worse. That is the part worth examining, because the reason the alternative is worse is domestic, and entirely of our own making.

The volumes are not enormous. Britain imported roughly 200,000 barrels a day of jet fuel and diesel last year, of which the Indian share was around 39,000 barrels a day. Call it a fifth, and probably less by the time the licence lapses. This is not a lights-out problem, and I would not dress it up as one.

However, it matters because that fifth is a marginal barrel, and marginal barrels set the price in a market with no slack. The fuel can be found. What matters is the price of finding it, in a product Britain is already short of.

## What we still refine, and what we import

Britain is short of these two products, jet fuel and diesel, before this licence lapses, not because of it. On the department's own accounting, British refineries met 49% of domestic diesel demand and 30% of jet fuel demand. For petrol, we produced a fifth more than we needed and exported the surplus, one of only sixteen OECD countries self-sufficient in the stuff.

![What we still make, and what we buy](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-uk-fuel-self-sufficiency-aug26-2ed49746aef9-light.png)

_Petrol is the exception, not the rule. The products we are short of are the ones that move goods and aircraft._

Fuels Industry UK calculates that Britain imported 3.1 times as much kerosene as it produced in 2024, and 2.5 times as much diesel. As recently as 2011, the UK was self-sufficient in diesel and at the turn of the century, more than four-fifths of our kerosene (jet fuel) demand was met here.

Now, the UK's largest single source of imported jet fuel is Kuwait, which the government identifies as the primary supplier of 38% of the total, some 4.1 million tonnes. So, Britain has the second-busiest international airport in the world and yet buys most of its aviation fuel from the Gulf, through a shipping corridor that has been the defining geopolitical risk of the past eighteen months and it has now set a date to stop buying a further slice of it from India.

## Four refineries left of 18

This dependence on imports is not an accident, it is the direct result of a bungled energy policy implemented over many years. Grangemouth, Britain's oldest refinery, stopped processing crude in April 2025 and became an import terminal. Prax Lindsey went into insolvency in June of the same year and was wound down by October, when no credible buyer emerged. Now, only four refineries remain operational in the UK: Fawley, Humber, Pembroke and Stanlow. There were 18 in the 1970s.

![The base we are working from](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-uk-refining-base-aug26-9a3ba3a25be7-light.png)

_Two of the six closed inside eighteen months. The government's own call for evidence, published in February after both closures, states that Britain will need refineries for the long term._

The energy department, not surprisingly, is aware of this problem. Its call for evidence on the future of the downstream oil sector, published in February, states plainly that Britain will need refineries for the long term, for national resilience, national security and industrial production. Interestingly, that document was written after both closures, not before them.

## Why thin capacity moves the price

Losing the plants would matter less if somebody else had capacity going spare. Spare refining capacity is a shock absorber. When a plant goes down for maintenance, or a war closes a shipping lane, or demand for one product spikes, somebody else's idle unit takes the strain and the product price barely moves, but given that Europe has also closed a significant amount of refining capacity there is now very little of it left.

Argus's analysis of the 2025 closures makes the point clearly: with the blanket of spare capacity stripped away, European product prices and their margins against crude now rise high and fast when anything goes wrong.

The effect is already visible at the pump.

![The price of not refining it here](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-diesel-premium-aug26-3031bd50fe63-light.png)

_Fuel duty is identical on diesel and petrol, and crude is common to both. The spread is the market pricing the product we no longer make enough of._

In June 2025 diesel carried a 6p premium over petrol. By April this year it had reached 34.1p, wider than the 24.45p gap at the height of the 2022 energy crisis. It has since narrowed to 21p. Diesel at 176.6p a litre in June was 28.5% dearer than a year earlier, against 18.4% for petrol. Fuel duty is identical on both fuels. Crude is common to both. The gap between the two products is the market pricing the product Britain has stopped making enough of, just at the moment when nobody else has spare capacity to make it either.

There is a further wrinkle that gets missed. A refinery cannot simply make more diesel. Increasing distillate yield means increasing output of everything else too, including the products where demand is satisfied, which drags the margins on those products down. To lift the overall refining margin by a little, the margin on the product in demand has to move by a lot. That is why distillate spreads move in jumps.

_Related:_ [Still don't get it: why higher rates make second-round effects more likely](https://www.noisecancelling.co/read/still-don-t-get-it-why-higher-rates-make-second-round-effects-more-likely) — The Bank held at 3.75%, as I expected. What I did not expect was three votes for a rise, justified by second-round effects the committee itself has conceded are not there.

## A bit of background

This is not a simple story and so some additional explanation is required.

Starting with the Prax Lindsey refinery, which I have seen used as an exhibit in the case against net zero. It is not a clean one. The Commons Library attributes the collapse to financial losses, maintenance downtime and irregularities in a £783m financing arrangement; a court also froze £150m of the owner's assets. Prax had lost around £75m on the site since buying it from TotalEnergies in 2021, and TotalEnergies had already halved its capacity in 2016. The refinery was small, old and was clearly confronting other issues, and so the UK's high carbon taxes were not the sole culprit. What I would say is that a plant carrying those kind of problems needs a cost base and a competitive landscape that gives it a chance. Unfortunately that is not what prevails in the UK. As a result of the UK's Emissions Trading Scheme, refineries here confront high carbon taxes which their equivalents in the Persian Gulf or Africa do not. (The Carbon Border Adjustment Mechanism, CBAM – in effect the levying of a carbon tax on imported products to limit "carbon leakage" – has not hitherto applied to imported refined products.)

Second, this is not only a British story. Europe lost around 400,000 barrels a day of refining capacity between 2024 and 2025, and roughly 800,000 barrels a day has been permanently closed across Europe and North America. Meanwhile, the world added more than 2.5 million barrels a day of new capacity in three years: Jizan in Saudi Arabia, Duqm in Oman, Dangote in Nigeria, Olmeca in Mexico, Yulong in China, and Al-Zour in Kuwait at 615,000 barrels a day on its own. Our four surviving refineries have a combined capacity smaller than that single Kuwaiti plant. Refining moved to where the crude, the scale and the capital are and where the carbon taxes aren't. Some of what Britain has lost, it would probably have lost under any government. Having said that, what was in our gift was how fast, and on what terms, and more importantly, how the plants that remain compete.

Third, the remaining four have coped better than I would have predicted. DESNZ reported in June that they had partly compensated for the Grangemouth and Lindsey closures by raising output of key transport fuels, with exports down 13% and imports down 7.2%. Overall net import dependency as a result edged down to (only!) 43.3% in 2025.

Fourth, the carbon border point may not last. Refined products were left out of the carbon border adjustment mechanism, so an imported litre of diesel currently arrives without the carbon cost that a British-made litre carries. S&P's base case is that an extension of CBAM to refining will be agreed and legislated. If that happens it removes one of my two complaints, though I would not expect it before the licence expires at the end of this year.

The IMF has said that Britain is uniquely vulnerable to high energy prices because of how much energy it imports, and that countries with more nuclear and renewable capacity, France and Spain among them, are better protected. I take the first half of that as the indictment. The second half is an argument for building generation here. It is not an argument for importing more of what we used to refine.

What survives all of that is this. Britain did not choose the global rationalisation of refining capacity, but it did choose the terms on which its remaining plants compete. For example, when the government introduced the Supercharger scheme which arrived in April 2025 and was designed to lower electricity costs for energy-intensive manufacturing sectors of the economy, refiners were among those least able to benefit, because they largely generate their own power. In other words, instead of helping to mitigate the challenges the remaining refineries confront, the policy initiative in fact provided very little.

Consequently, when confronted by the more recent challenges associated with the war in the Persian Gulf, the four remaining UK refineries responded by cutting exports which of course is a one-off and at the margin not that significant given the scale of the UK's dependence on imports of jet fuel and diesel.

## What does all this mean?

There is a lot to take on board in this piece and lots of moving parts but the core message is as follows:

- The UK has not had a joined up industrial policy that works for many of its key industries. Successive governments have lambasted the oil and gas industry in the UK for far too long leaving us exposed and vulnerable to the kind of shocks now unfolding in global energy markets. On the altar of net zero self-flagellation we have undermined the viability of our industrial base and our energy and refining industries leaving the economy inappropriately dependent on imported oil, gas, electricity and refined products.

- A lack of domestic refining capacity means that we have to import 50% of the diesel fuel the economy needs and as a result there is a 21p premium on a litre of diesel where normally it would hover at around 6p. That is a cost that lands on hauliers, farmers and the construction industry amongst others. The 10% to 20% premium on UK jet fuel costs falls on airlines, and ultimately on consumers and businesses. These costs fall unevenly: on the businesses that move physical things, in an economy that has spent twenty years telling itself it no longer needs to and it arrives on top of the highest industrial electricity price in the developed world.

- Given these challenges it is remarkable that manufacturers, farmers, airlines and refineries amongst many others are able to survive in the UK against this self-harming, suicidal energy policy.

There is also the thing none of this achieves. Demand for diesel and kerosene does not fall when a British refinery closes. It is met from Kuwait, from India, from Nigeria, and the fuel is carried here in ships burning heavy fuel oil. The emissions do not disappear, they increase. They leave the country attached to the industry, and the cost stays here.

That is the test for the upcoming Budget, and it is a narrow one. Climate levies, network charges and carbon costs are where the industrial electricity price is actually made and the same goes for domestically produced energy and refined products. Consequently, they are, in my view, the only levers that can change the landscape for these key industry sectors. If the answer this Autumn is another rebate on a household bill, which frankly is the most likely outcome, my sense is that we will be back here next year with a worse set of numbers on energy imports and potentially fewer refinery sites left to depend upon.

I would like to be wrong.

_Nothing here is a recommendation. Companies, fields and projects are referenced as illustrations of how I read the policy environment, not as investments to act on._