Sunoco Inc. says it's getting out of the refining business.
The Philadelphia company, which owns two refineries in Pennsylvania -- one in Marcus Hook and another in South Philadelphia -- says refining oil into gasoline and other fuels has yielded disappointing returns.
"We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business and focus on our profitable retail and logistics businesses which have higher returns, growth potential, and provide steady, ratable cash flow," said Lynn L. Elsenhans, Sunoco's chairman and chief executive officer.
Oil refining is only profitable when a company can sell refined petroleum products for a higher price than the crude oil it buys as a feedstock.
Sunoco Inc. plans to sell their refineries and focus on its retail and logistics business. The company will pursue all options to sell, but if a suitable transaction cannot be implemented, they intend to idle the main processing units at the facilities in July 2012.
Approximately 1500 people work in the refinery department with the majority based out of Philadelphia. Sunoco Inc. say that they will make every effort to relocate the workers to other departments within the company.
Sunoco says the decision to get out of refining will cost the company up to $2.7 billion in the third quarter.
Jim Savage, the President of the United Steelworkers, says that both he and 600 other members of the steelworkers union are worried about their jobs.
"I saw the writing on the wall," said Savage. "I'm still shocked to actually get the news even if you expect it."
Savage spent most of Tuesday listening to union leaders. Most members make between $80,000 to $100,000 a year. He calls Sunoco's decision a "punch to the gut."
"It's a dangerous job, we work hard at it and we're good at what we do," said Savage. "Hopefully Sunoco will find a buyer for the refineries."
