President Donald Trump came out swinging in August, taking aim at major oil companies. He accused ExxonMobil and Chevron of making too much money while fuel supplies remained tight, all in the aftermath of the U. S.-Israeli conflict with Iran. The latest corporate earnings reports show these oil behemoths are still raking in the cash, thanks to constrained fuel supplies and high refining margins, which have been driven up by ongoing global unrest.
Oil giants like Shell, BP, TotalEnergies, and Exxon are all reporting significant jumps in their refining margins. These margins reflect the profits they make from turning crude oil into products such as gasoline and diesel. Chevron, on the other hand, doesn't break out its refining-margin numbers separately. But it did announce a massive jump in its downstream earnings, more than quadrupling to $4.9 billion from the previous year. This rise is due to better margins on refined-product sales, even as global refinery output remains under pressure.
The conflict has only worsened supply chain issues. Ukrainian drones have been striking Russian refineries, and problems with Middle Eastern energy infrastructure are making things worse. The market is feeling the pinch. And it's not just these issues. Refinery closures in Europe and North America have compounded the problem. European Commissioner for Energy and Housing, Dan Jørgensen, pointed out the gravity of the situation. Around a quarter of EU refineries have shut down over the past twenty years, raising fears of an energy security crisis.
It's not just refining margins that are fattening the wallets of oil majors. High crude oil prices are also boosting their earnings. These integrated oil companies, which handle everything from drilling for oil and gas to refining it, are seeing profits that rival those during the 2022 energy shock, which was caused by Russia's invasion of Ukraine. Consumers, meanwhile, are feeling the squeeze from rising energy costs.
Analysts are questioning the effectiveness of political moves aimed at curbing these price spikes. Measures like releasing emergency diesel reserves or the U. S. working with Russia to increase diesel supply might not make much of a dent unless they significantly enhance supply, cut demand, or ease global tensions. Raphael Portela, who heads corporate strategy and analytics at energy consultancy Wood Mackenzie, noted that crude oil is still flowing out of the Gulf amid the war, but it's costly. The diesel and jet fuel that could be refined from this crude are still hard to come by.
Portela went on to explain that Russia's refinery outages and export bans have hit global supply hard. He laid out what needs to happen to ease the crisis: more crude for global refineries, reopening Gulf refineries, and resuming Russian exports. He mentioned that a resolution in the Hormuz region could quickly impact margins. However, with inventories so low, physical supply constraints could remain until 2027.
