U.S. Refiners Post Record Profits as Fuel Crunch Cuts 5M Barrels

U.S. refiners are running flat out to plug a global fuel gap that has pushed profits to four-year highs and drawn presidential criticism.

The Iran war and Ukrainian drone strikes have knocked out roughly 5 million barrels a day of global refining capacity, forcing U.S. plants to run at 97.2 percent of operable capacity in late July — a level last seen in 2018 — and delivering the industry's best quarterly earnings in four years.

"I've never seen the available capacity relative to demand as low as it is today," said Darren Woods, chief executive of Exxon, the nation's third-largest oil refiner. "It's going to take a while for the industry to climb its way out of that hole."

Marathon Petroleum earned $5.1 billion in the second quarter, quadrupling year-ago profit. Valero booked $3.7 billion, up more than fivefold. Phillips 66 collected $3.8 billion, more than four times last year's level. Exxon reported $14.5 billion in total profit, with $5.5 billion coming from refining operations — quadruple last year's refining earnings.

The windfall has drawn the ire of President Trump, who criticized oil companies this week for wringing too much cash out of American gas pumps as the average U.S. gasoline price reached $4.06 a gallon. Trump said in a Fox News interview Tuesday that negotiators were close to a deal with Iran that could reopen the Strait of Hormuz and push pump prices to $2.50.

Executives across the industry say that scenario is unlikely this year. Rebuilding refineries from Saudi Arabia to Kuwait to Bahrain that Iran targeted will take time, and Ukrainian drones continue to strike Russian energy assets. Russia, once a top fuel exporter, has had about a third of its refining capacity knocked offline and has banned some fuel shipments until February.

The supply shock has reshaped global trade flows. Saudi Arabia's oil exports to the U.S. dropped to zero in July — the first time monthly federal data show that happening since 1985. U.S. refiners have turned to domestic fields, Canada and Venezuela for crude. China's fuel exports have collapsed to roughly 350,000 barrels a day from 650,000 to 900,000 barrels a day in recent years, said Brian Stetter, an analyst at S&P Global.

U.S. diesel exports hit a record 1.9 million barrels a day last week, and jet fuel shipments were near record levels, according to Energy Information Administration data. Yet domestic inventories keep falling: the nation's commercial and strategic crude stockpiles dropped to 711.8 million barrels by July 31, the lowest in 42 years. Diesel stocks fell 3.5 million barrels and gasoline stocks dropped 1.6 million barrels in the latest week.

Gary Simmons, Valero's chief operating officer, said the world's inventory of refined fuels including gasoline and diesel is 130 million barrels below normal levels for this time of year. "Our traders aren't really seeing any Chinese barrels leave the region," he said.

A Structural Gap

The refining capacity crunch has a structural dimension. More than two dozen U.S. refineries have shut since 2000, and the nation's collective fuel-making capacity is 3 percent below its 2019 peak, according to federal data. The Trump administration in March announced a new refinery project in South Texas backed by India's Reliance Industries — the first new U.S. refinery since 1977 if it comes to fruition.

White House spokeswoman Taylor Rogers said America's refining capacity is critical to keeping energy prices low and blamed Democratic climate policies for "shuttered refineries across the country." She said Trump has "reversed those destructive policies to ensure the United States, and the world, has access to reliable, affordable and secure energy."

Energy analysts expect markets to remain tight through the end of 2027. That means sustained profitability for U.S. refiners — Marathon and Valero shares are up about 85 percent this year, Phillips 66 up nearly 60 percent — but also sustained political pressure on the White House as high diesel prices feed into the cost of everything from groceries to lumber.

This article is for informational purposes only and does not constitute investment advice.