Fuel Prices Resist Oil Price Drops Amid Global Refining Capacity Bottleneck

Despite falling oil prices, fuel prices remain unlikely to cool down anytime soon. The traditional correlation between oil and fuel prices is weakening due to a bottleneck in crude oil supply, refining capacity, and the fuel supply chain.

The Strait of Hormuz shipping disruption and attacks on Russian oil refineries have narrowed the global refined fuels supply by nearly 10%, according to Melius Research estimates. ExxonMobil's and Chevron's US Gulf region refineries operated at 95% and 97% capacity, respectively, in the second quarter.

WTI crude oil prices have fallen by about 26% from their peak this year, but gasoline prices have only decreased by about 10%, while diesel prices remain almost unchanged. Experts predict that fuel prices will continue to be determined by inventory levels and refining capacity rather than just reflecting crude oil price movements.

The energy market is shifting towards a different logic, with high profits driven by scarce refining capacity. ExxonMobil and Chevron recorded combined profits of over $26 billion in the second quarter alone.