The Determinants of Plant Exit: the Evolution of the U.S. Refining Industry
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This paper analyzes the exit and expansion of U.S. petroleum refineries using plant-level data from 1947 to 2013. We find that small refineries and refineries owned by a multi-plant firm are more likely to close. If a multi-plant firm closes a refinery, it closes a smaller one. Unlike previous research, we find no clear relationship between a firm’s share of national refining capacity and the probability of refinery exit. We also find that refineries close when the industry as a whole has low capacity utilization. In total, firms close small, likely inefficient, refineries when refinery utilization is low.
KeywordsRefining Multinomial Probit Plant exit Multi-plant coordination
JEL ClassificationL11 L71
We thank Matthew Chesnes, Jeffrey Fischer, Daniel Hosken, Nicholas Kreisle, and Nathan Wilson, for helpful comments and Elisabeth Murphy and Thomas Sharon for research assistance. The views expressed are those of the authors and do not necessarily represent those of the U.S. Federal Trade Commission or any individual Commissioner.
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