Global Refining Crunch Puts Squeeze on Fuel Prices

Global fuel prices are expected to remain high into 2027 due to refining capacity constraints. The conflict in the Middle East and strikes on Russian refineries have significantly reduced supply from these regions, while other areas lack sufficient capacity to offset the losses. According to Nikhil Agarwal, managing director of Globestar Energy, 'Bapco is gone, the GTL Qatar is gone, Russian refineries are gone. It will take years to build them back and bring them on board.'

Crude oil prices may seem abundant globally, but refining capacity is a major issue. As Agarwal explained, 'Crude is surplus globally, but there is no refining capacity available to refine it and bring it to market.' The International Energy Agency (IEA) reported that refinery crude throughputs in July were nearly 5 million barrels per day below year-ago levels, at 80.9 million bpd.

Phillips 66's Executive Vice President of Marketing & Commercial, Brian Mandell, noted that refineries in Asia and the Middle East are down by 7 million barrels a day, while Russian refineries are down by another 1.4 million barrels. The damage from these strikes will take time to repair.