According to reports, conflict in the Persian Gulf and Russia has roiled energy markets and pushed refining profits to record highs, handing oil giants an unexpected windfall of more than $50 billion.
Exxon Mobil (XOM.US), Chevron (CVX.US), BP (BP.US), Shell (SHEL.US), and TotalEnergies (TTE.US) all beat expectations in the third quarter, with combined adjusted net income reaching $56.3 billion, driven by an unprecedented fuel supply crisis that has pushed retail pump prices to historic highs.
The pain drivers feel at the gas station is generating excess profits for the oil supermajors, while also stoking discontent as U.S. President Trump and his Republican Party prepare for midterm elections that will determine control of Congress.
American voters continue to rank the cost of living as their top concern, and high fuel prices are turning traditionally Republican strongholds such as Texas, Kansas, and Alaska into battleground states.
Since the U.S. and Israel struck Iran at the end of February, international oil prices have risen nearly 60%, and refining has become another bottleneck in the global energy supply chain.
War in the Middle East and the Russia-Ukraine conflict have idled roughly 10% of global fuel-making capacity, delivering massive profits to the refineries still in operation.
Exxon Mobil said in a Friday statement that its refining division posted record third-quarter earnings of $9.05 billion, nearly five times the level of a year earlier.
Chevron's refineries earned $4.93 billion in the same period, the highest ever and four times the level of a year ago.
More than half of BP's $8.46 billion in adjusted net income came from a division that includes refining and trading. Earlier in the week, Shell and TotalEnergies also reported strong results.
Exxon Mobil shares rose 1.6% in premarket trading in New York, Chevron gained 1.3%, BP climbed as much as 1.8% in London, and Shell and TotalEnergies also advanced.
Trump downplayed concerns about gasoline and diesel prices at a rally in Texas this week, saying prices would fall "soon." Average fuel prices during his second term are higher than under his predecessor, Biden.
A few days earlier, he praised U.S. oil companies for making the country "a fortune," a clear shift from this summer when he criticized them for "making too much money."
Yet as the Iran conflict enters its ninth month, there is little sign of relief in global energy markets despite more vessels passing through the Strait of Hormuz. So far, the market has relied heavily on strategic and commercial inventories. But as those buffers run down, price volatility is expected to intensify.
Exxon Mobil, which operates the largest refining system outside China, reported its fourth-highest overall profit in the company's 156-year history. Third-quarter adjusted earnings per share came in at $4.23, 10 cents above the analyst average estimate.
Exxon Mobil raised its dividend for a 44th consecutive year and pledged to maintain $20 billion in annual buybacks. Chief Financial Officer Neil Hansen said the profit surge was less a windfall than a reward for increasing output when it was most needed.
Since 2019, Exxon Mobil has raised Gulf Coast distillate production by 40%, helped by heavy investment since 2020, when rivals were selling refineries or converting them into biofuel plants. "As a company, the most meaningful response we can make to higher global commodity prices is to use every available tool to increase supply," Hansen said in an interview. Exxon Mobil is "putting more diesel into the market in today's very tight environment."
Chevron also posted the fourth-highest quarterly profit in its history. Third-quarter net earnings per share were $5.28, 35 cents above the analyst average estimate. The company maintained $2.5 billion in share buybacks for the quarter, at the low end of its full-year guidance range.
For a second straight quarter, Chevron executives used the windfall mainly to reduce debt. "We don't react to ups or downs, and we don't reposition. Right now, we're sticking to our long-term financial priorities and not changing anything," Chief Financial Officer Eimear Bonner said in an interview.
RBC Capital Markets' Biraj Borkhataria said in a report that Chevron did not raise its annual buyback range, "perhaps reflecting the external perception of large buybacks rather than increased investment during an energy crisis."
Thanks to last year's acquisition of Hess, Chevron's production rose year over year, allowing it to capitalize on an roughly 34% increase in international crude prices. The Hess deal gave Chevron a 30% stake in Guyana's prolific Stabroek block, which is operated by Exxon Mobil.
Chevron is on track to produce 300,000 barrels per day from Venezuela by the end of the year, 20% more than a year earlier. Its costs in Venezuela are below $20 a barrel, making it one of the most profitable oil-producing regions in the world. Bonner said Venezuela is "immediately accretive to earnings and free cash flow positive, and we're not worried about our ability to increase production."
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