Key facts
- Global refining capacity is at historic lows relative to demand, according to ExxonMobil and Chevron.
- U.S. refineries operated at roughly 97 percent of their capacity in the past month.
- Shell reported running refineries above official capacities in the second quarter.
- At least 5 million barrels per day of global refining capacity is offline.
- The Trump administration is exploring options to increase refining capacity.
- High operating rates leave little room for disruptions, and high margins are expected to continue.
Executives from ExxonMobil and Chevron have warned that the global oil refining industry is operating with significantly reduced capacity relative to demand, a situation that could sustain high energy prices. "With all that supply out, we’re well below available capacity, frankly, that I’ve ever seen," said one executive on an earnings call, adding that it would take time for the industry to recover.
These remarks come as the Trump administration is seeking to mitigate the impact of elevated gasoline prices with elections approaching. The American Automobile Association reported that nationwide average pump prices were $4.10 per gallon, nearly a dollar higher than the previous year. Data from the U.S. Energy Information Administration indicated that U.S. refineries operated at approximately 97 percent of their capacity this month, while Shell reported running its refineries at record rates above their official capacities during the second quarter.
POLITICO reported that the Trump administration is discussing with potential investors ways to bring idled refineries back online to help alleviate fuel price increases. Analysts have cautioned that the high operating rates leave minimal room for operational disruptions, especially with delayed maintenance and the looming hurricane season.
One executive stated he had "never seen" the world’s available refining capacity as low as it is today compared to demand. Factors contributing to this include Iran’s closure of the Strait of Hormuz, which removed 3 million barrels per day of capacity, and limitations on product exports from China and Russia, the latter due to Ukrainian strikes on its refineries. In total, at least 5 million barrels per day of capacity is offline, according to reports.
ExxonMobil's refineries achieved record diesel production in the second quarter, and the company anticipates a "very robust refining market with very high margins" in the coming months. Chevron echoed this sentiment, noting its refineries are operating at record levels and do not foresee an immediate easing of the supply crunch.