President Trump wanted to have U.S. energy dominance and low energy prices. He's getting one without the other -- and he hates it.
The Iran war and Ukrainian strikes on Russian refineries have knocked out a big chunk of the world's fuel-making apparatus, leaving the U.S. oil industry as the world's last major fuel supplier, contending with a runaway global supply shock that could last well into next year.
U.S. refiners have been running their plants at full tilt to meet demand at home and abroad as fuel prices around the world have soared, giving them windfall profits and drawing the ire of Trump. The president ripped into big oil companies this week for wringing too much cash out of American gas pumps.
While U.S. gasoline exports have held relatively steady, diesel exports hit a record 1.9 million barrels a day last week and jet fuel shipments were near record levels, according to data from the Energy Information Administration.
The White House is carefully eyeing inflation and affordability issues heading into the November midterm elections and high diesel prices can boost the price of everything from groceries to lumber. But Trump's energy frustrations aren't likely to be solved this year.
Bringing prices at the pump down will require global energy flows to recover to their prewar levels, according to the CEOs of ExxonMobil, Marathon Petroleum and Valero. That means rebuilding refineries across the Middle East, from Saudi Arabia to Kuwait to Bahrain, that Iran targeted. Energy analysts have said they expect markets to remain tight through the end of 2027.
Ukrainian drones continue to rain down on Russian energy assets, too. Russia, once a top exporter of fuel, has had about a third of its refining capacity knocked offline and has banned some fuel shipments until February. Meanwhile, fuel exports from China have collapsed, in part because it is getting less crude oil to process from the Middle East.
The Iran conflict has stymied traffic in the Strait of Hormuz, a vital artery for oil voyages from Gulf countries. Saudi Arabia's oil exports to the U.S. dropped to zero in July, the first time monthly federal data show that happening since 1985. U.S. refiners have opted to buy more crude oil to process from American oil fields, as well as from Canada and Venezuela.
Trump said in a Fox News interview on Tuesday that negotiators were close to a deal with Iran that could open the strait, and that he believed the move would trigger the average price of a gallon of gasoline in the U.S. to fall to $2.50. As of Thursday, the U.S. gas price averaged $4.06 a gallon.
The persistent problem, executives say, is refining.
"I've never seen the available capacity relative to demand as low as it is today," said Darren Woods, chief executive of Exxon, the nation's third-largest oil refiner. "It's going to take a while for the industry to kind of climb its way out of that hole."
Roughly 5 million barrels a day of the world's refining capacity is currently out of commission between the Middle East and Russia, energy executives said. At the same time, the world is projected to consume roughly 65 million barrels a day of gasoline, diesel and jet fuel this year, according to the International Energy Agency.
White House spokeswoman Taylor Rogers said America's refining capacity is critical to keeping energy prices low for families and businesses, and blamed Democratic climate policies for "shuttered refineries across the country."
"President Trump has reversed those destructive policies to ensure the United States, and the world, has access to reliable, affordable and secure energy," she said.
More than two dozen refineries have shut down around the U.S. since 2000, including a few large ones on the West Coast. Several big refineries have become more massive in recent years, as energy companies built additional units at plants to allow them to make more fuel. The nation's collective fuel-making capacity is 3% lower than it was at its peak in 2019, according to federal data.
The Trump administration in March announced a new refinery project in South Texas, backed by India's Reliance Industries. If it comes to fruition, the complex would be the first new refinery built in the U.S. since 1977.
The global shortage of fuel that caused prices to rise also kicked U.S. refiners into high gear. American fuel factories used 97.2% of their operable capacity in late July, according to federal data, a level last seen in 2018. As refineries crank out more fuel to meet demand, energy companies are raking in billions of dollars.
Marathon, Valero and Phillips 66 all reported their highest second-quarter earnings in four years. Shares of Marathon and Valero are up about 85% so far this year. Phillips 66 stock is up nearly 60%.
Marathon earned $5.1 billion, quadrupling its profit from the same period last year. Valero booked net income of $3.7 billion, up more than fivefold. Phillips 66 collected $3.8 billion, more than four times the profit it made during the same period last year.
Exxon, which Trump criticized for posting a $14.5 billion profit last week, reported that $5.5 billion of that came from refining operations, quadrupling what it made last year. The company has nearly two dozen sizable refineries from Texas to Singapore.
Gary Simmons, Valero's chief operating officer, said the world's inventory of refined fuels including gasoline and diesel is 130 million barrels below normal levels for this time of year.
China, a key fuel provider to the global economy, has slashed exports as crude supplies from the Middle East have petered out. Shipments from China averaged between 650,000 and 900,000 barrels a day in recent years, but now exports stand around 350,000 barrels a day, said Brian Stetter, an analyst at S&P Global. The country partially lifted a ban on fuel exports last month, executives said, but it has hardly made a difference to global supplies.
"Our traders aren't really seeing any Chinese barrels leave the region," Simmons said.
As American refineries run flat out, U.S. inventories are still dropping because of voracious demand. The nation's commercial and strategic stockpiles of crude dropped to their lowest level in 42 years by July 31, to 711.8 million barrels, while diesel stocks fell by 3.5 million barrels and gasoline stocks dropped by 1.6 million barrels, according to federal data.
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