Refinery Bottlenecks Keep Gas Prices High Despite Falling Oil Prices

Oil prices have dropped significantly this year, but gas prices at the pump remain stubbornly high. The disconnect between falling crude oil prices and stable gasoline prices has puzzled analysts, but a closer look reveals that refineries are struggling to keep up with demand.

Refineries around the world have been hit hard by conflicts, including Ukrainian attacks in Russia and disruptions in the Strait of Hormuz. ExxonMobil's CEO Darren Woods notes that available refining capacity is tighter than ever before, with 5 million barrels per day unable to reach the global market. Shell's refineries are running at 102% capacity, pushing equipment to its limits.

Goldman Sachs analyst Neil Mehta agrees, calling refining 'obviously the bottleneck' in the energy system. With high margins and scarce inventory of refined products, refiners are making a profit per gallon, which takes away some pressure to lower prices. As Chevron CFO Eimear Bonner notes, geopolitical uncertainty has tightened markets and reinforced the importance of reliable supply.