Refining Capacity Breaks Link Between Crude Oil and Gas Prices

ExxonMobil's CEO Darren Woods has warned motorists that they should not expect a rapid decline in gas prices, even when crude oil prices drop. He attributed this to constrained global refining capacity, which has broken the traditional link between raw oil and fuel prices.

Woods explained that gasoline and diesel prices now reflect the supply of finished products rather than crude alone. He pointed out that U.S. refineries operated at 96.1% of capacity in mid-July, yet gasoline inventories were 7% below their five-year average and distillate inventories were 10% lower.

The Energy Information Administration expects tight inventories to prevent wholesale gasoline prices from falling as quickly as crude during the third quarter. This situation is already benefiting Exxon's downstream business, with second-quarter adjusted Energy Products earnings rising to $4.10 billion from $2.80 billion sequentially.