An oil refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosine, and liquefied petroleum gas. Oil refineries are typically large sprawling industrial complexes with extensive piping running throughout, carrying streams of fluids between large chemical processing units.

Raw or unprocessed ("crude") oil is not useful in the form it comes in out of the ground. Although "light, sweet" (low viscosity, low sulfur) oil has been used directly as a burner fuel for steam vessel propulsion, the lighter elements form explosive vapors in the fuel tanks and so it is quite dangerous, especially so in warships. For this and many other uses, the oil needs to be separated into parts and refined before use in fuels and lubricants, and before some of the byproducts could be used in petrochemical processes to form materials such as plastics, detergents, solvents, elastomers, and fibers such as nylon and polyesters. Petroleum fossil fuels are used in ship, automobile and aircraft engines. These different hydrocarbons have different boiling points, which means they can be separated by distillation. Since the lighter liquid elements are in great demand for use in internal combustion engines, a modern refinery will convert heavy hydrocarbons and lighter gaseous elements into these higher value products using complex and energy intensive processes.

Oil can be used in so many various ways because it contains hydrocarbons of varying molecular masses, forms and lengths such as paraffins, aromatics, naphthenes (or cycloalkanes), alkenes, dienes, and alkynes. Hydrocarbons are molecules of varying length and complexity made of only hydrogen and carbon atoms. Their various structures give them their differing properties and thereby uses. The trick in the oil refinement process is separating and purifying these.

Once separated and purified of any contaminants and impurities, the fuel or lubricant can be sold without any further processing. Smaller molecules such as isobutane and propylene or butylenes can be recombined to meet specific octane requirements of fuels by processes such as alkylation or less commonly, dimerization. Octane grade of gasoline can also be improved by catalytic reforming, which strips hydrogen out of hydrocarbons to produce aromatics, which have much higher octane ratings. Intermediate products such as gasoils can even be reprocessed to break a heavy, long-chained oil into a lighter short-chained one, by various forms of cracking such as Fluid Catalytic Cracking, Thermal Cracking, and Hydrocracking. The final step in gasoline production is the blending of fuels with different octane ratings, vapor pressures, and other properties to meet product specifications.

Oil refineries are large scale plants, processing from about a hundred thousand to several hundred thousand barrels of crude oil per day. Because of the high capacity, many of the units are operated continuously (as opposed to processing in batches) at steady state or approximately steady state for long periods of time (months to years). This high capacity also makes process optimization and advanced process control very desirable.

• Desalter unit washes out salt from the crude oil before it enters the atmospheric distillation unit.
• Atmospheric Distillation unit distills crude oil into fractions. See Continuous distillation.
• Vacuum Distillation unit further distills residual bottoms after atmospheric distillation.
• Naphtha Hydrotreater unit uses hydrogen to desulfurize naphtha from atmospheric distillation. Must hydrotreat the naphtha before sending to a Catalytic Reformer unit.
• Catalytic Reformer unit is used to convert the naphtha-boiling range molecules into higher octane reformate (reformer product). The reformate has higher content of aromatics, olefins, and cyclic hydrocarbons). An important byproduct of a reformer is hydrogen released during the catalyst reaction. The hydrogen is used either in the hydrotreaters or the hydrocracker.
• Distillate Hydrotreater unit desulfurizes distillates (such as diesel) after atmospheric distillation.
• Fluid Catalytic Cracking (FCC) unit upgrades heavier fractions into lighter, more valuable products.
• Hydrocracker unit uses hydrogen to upgrade heavier fractions into lighter, more valuable products.
• Visbreaking unit upgrades heavy residual oils by thermally cracking them into lighter, more valuable reduced viscosity products.
• Merox unit treats LPG, kerosene or jet fuel by oxidizing mercaptans to organic disulfides.
• Coking units (delayed coking, fluid coker, and flexicoker) process very heavy residual oils into gasoline and diesel fuel, leaving petroleum coke as a residual product.
• Alkylation unit produces high-octane component for gasoline blending.
• Dimerization unit converts olefins into higher-octane gasoline blending components. For example, butenes can be dimerized into isooctene which may subsequently be hydrogenated to form isooctane. There are also other uses for dimerization.
• Isomerization unit converts linear molecules to higher-octane branched molecules for blending into gasoline or feed to alkylation units.
• Steam reforming unit produces hydrogen for the hydrotreaters or hydrocracker.
• Liquified gas storage units for propane and similar gaseous fuels at pressure sufficient to maintain in liquid form. These are usually spherical vessels or bullets (horizontal vessels with rounded ends.
• Storage tanks for crude oil and finished products, usually cylindrical, with some sort of vapor emission control and surrounded by an earthen berm to contain spills.
• Amine gas treater, Claus unit, and tail gas treatment for converting hydrogen sulfide from hydrodesulfurization into elemental sulfur.
• Utility units such as cooling towers for circulating cooling water, boiler plants for steam generation, instrument air systems for pneumatically operated control valves and an electrical substation.
• Wastewater collection and treating systems consisting of API separators, dissolved air flotation (DAF) units and some type of further treatment (such as an activated sludge biotreater) to make such water suitable for reuse or for disposal.^]
• Solvent refining units use solvent such as cresol or furfural to remove unwanted, mainly asphaltenic materials from lubricating oil stock (or diesel stock).
• Solvent dewaxing units remove the heavy waxy constituents petrolatum from vacuum distillation products.

The world's first oil refineries were set up by Ignacy Łukasiewicz near Jaslo, Austrian Empire (now in Poland) in the years 1854-56^[10][11] but they were initially small as there was no real demand for refined fuel. As Łukasiewicz's kerosene lamp gained popularity the refining industry grew in the area.

The first large oil refinery opened at Ploieşti, Romania in 1856.

Several other refineries were built at that location with investment from United States companies before being taken over by Nazi Germany during World War II. Most of these refineries were heavily bombarded by US Army Air Forces in Operation Tidal Wave, August 1, 1943. Since then they have been rebuilt, and currently pose somewhat of an environmental concern.

Another early example is Oljeön, Sweden, now preserved as a museum at the UNESCO world heritage site Engelsberg. It started operation in 1875 and is part of the Ecomuseum Bergslagen.

At one time, the world's largest oil refinery was claimed to be Ras Tanura, Saudi Arabia, owned by Saudi Aramco. For most of the 20th century, the largest refinery of the world was the Abadan refinery in Iran. This refinery suffered extensive damage during the Iran-Iraq war. The world's largest refinery complex is the "Centro de Refinación de Paraguaná" (CRP) operated by PDVSA in Venezuela with a production capacity of 956,000 barrels per day (Amuay 635,000 bpd, Cardón 305,000 bpd and Bajo Grande 16,000 bpd). SK Energy's Ulsan refinery in South Korea with a capacity of 840,000 bpd and Reliance Petroleum's refinery in Jamnagar, India with 660,000 bpd are the second and third largest, respectively.

Early US refineries processed crude oil to recover the kerosene. Other products (like gasoline) were considered wastes and were often dumped directly into the nearest river. The invention of the automobile shifted the demand to gasoline and diesel, which remain the primary refined products today. Refineries pre-dating the EPA were very toxic to the environment. Strict legislation has mandated that refineries meet modern air and water cleanliness standards. In fact, obtaining a permit to build even a modern refinery with minimal impact on the environment (other than CO₂ emissions) is so difficult and costly that no new refineries have been built (though many have been expanded) in the United States since 1976. As a result, some believe that this may be the reason that the US is becoming more and more dependent on the imports of finished gasoline, as opposed to incremental crude oil. On the other hand, studies have revealed that accelerating merger activity in the refining and production sector has reduced capacity further, resulting in tighter markets in the United States in particular.

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