Source: Fortune.com
Summary
ExxonMobil and Chevron warned that high fuel prices will persist even if oil prices drop due to global refining capacity being critically short. The constraint on refining capacity is causing fuel prices to remain high, accelerating inflation, and benefiting refinery owners but driving up costs for consumers. The US average gasoline price has risen above $4 a gallon, and retail diesel prices are just 6% below their highs this year.
Our Reading
The numbers tell one story. ExxonMobil and Chevron are warning of a refining capacity constraint that’s causing fuel prices to stay high. The industry is running flat out to meet demand, with nearly 10% of global refining capacity offline. Refining margins are at record highs, benefiting owners but driving up costs for consumers. The trend is evident in the US, where gasoline prices are creeping up despite oil prices dropping.
ExxonMobil’s CEO Darren Woods said, “I’ve never seen the available capacity relative to demand as low as it is today.” Chevron CEO Mike Wirth added, “I think we’re going to see some upward pressure on product pricing here into the third quarter and perhaps beyond that.” The industry is running out of slack, and the pain point is in middle distillates, including diesel, jet fuel, and heating oil.
The situation is translating to a perfect storm of high fuel prices, low refining capacity, and geopolitical uncertainty, which is reinforcing the importance of reliable supply.
Author: Evan Null
