Fuel Prices to Remain High as Global Refining Capacity Crumbles

Global fuel prices are unlikely to drop anytime soon as wars in Russia and the Middle East have severely impacted global refining capacity, leaving nearly 10% of the world's ability to refine crude oil offline. ExxonMobil Holdings Corp. and Chevron Corp. warn that high fuel prices will persist even if oil prices fall in the coming months.

Refining is now the bottleneck in the petroleum system, with high margins benefitting refinery owners but driving up costs for consumers. According to Melius Research, the Strait of Hormuz closure, Ukrainian attacks on Russian refineries, and China's export ban have significantly reduced global refining capacity.

The average price of gasoline has crept above $4 a gallon in the US, with retail diesel prices only 6% below their highs this year. Chevron CEO Mike Wirth expects upward pressure on product pricing into the third quarter and beyond, while ExxonMobil sees the trend advancing for the foreseeable future due to about 5 million barrels a day of refining capacity being unable to reach the global market.

ExxonMobil's Gulf Coast refineries ran at a utilization rate of 95% in the second quarter, with Chevron's US facilities running even harder at 97%. Shell Plc's refineries operated at 102%, but expect this to drop due to scheduled maintenance.