The study examined the relationship between capacity utilisation and profitability of downstream oil industry in developing countries. The study used a quantitative approach, and with the help of SPSS computed correlation and regression to determine the strength or degree of relationship between capacity utilisation and profitability of downstream oil industries in developing countries from 2001 to 2010.
The study revealed a positive relationship between capacity utilisation and profit of downstream oil industry though the correlation is relatively low. The regression output indicates that only 21.5% or 30.3% of changes in profit is explained by capacity utilisation (depending on whether one is using adjusted R square or R square respectively). It was concluded among others that downstream oil industry in developing countries needs a new business model. Among the recommendations were that there must be reform of policies in the downstream oil industry in developing countries, and firms in the industry should restructure their internal processes to reduce cost, increase productivity, and hence increase profit. They should also put measures in place to curb corruption and mismanagement, invest in the oil business especially infrastructure to improve their position on the supply curve and consciously look for and take advantage of the other determinants of profits apart from capacity utilisation.