Key facts
- Global fuel prices are expected to remain high until 2027 due to a significant crunch in refining capacity.
- Conflicts in the Middle East and Ukraine's attacks on Russian facilities have disrupted supply.
- Existing refining capacity cannot compensate for lost refined product flows.
- U.S. refiners are operating at near-maximum capacity and cannot significantly increase output in the short term.
- Oil companies are hesitant to invest in new refineries due to uncertain long-term fuel demand and high construction costs.
Global fuel prices are expected to remain elevated into 2027 due to a significant crunch in refining capacity, according to analysts. Conflict in the Middle East and strikes on facilities in the Persian Gulf have disrupted supply, while Ukrainian attacks on Russian refineries have led to an export ban on diesel from Russia. These factors are tightening global fuel markets, with existing capacity unable to compensate for the lost refined product flows. Nikhil Agarwal, managing director of Globestar Energy, noted that rebuilding damaged refineries in regions like the Middle East and Russia will take years. He highlighted that while crude oil is in surplus globally, the lack of refining capacity prevents it from being processed into usable fuels.
U.S. President Donald Trump met with executives from major oil companies, including Chevron, Marathon Petroleum, Valero Energy, and PBF Energy, urging them to lower gasoline prices immediately. However, refiners stated they cannot significantly increase output in the short term, as they have been operating at full capacity throughout the summer. The U.S.-Iran war has exacerbated supply disruptions, depleting global inventories. Executives discussed boosting existing capacity and the Renewable Fuel Standard, with some criticizing the latter's blending targets as driving up gasoline costs.
Despite record-high margins and profits, U.S. refiners are not planning to build new crude processing facilities, citing the high cost and uncertain future demand for fuels. Analysts suggest that even minor capacity additions would take months or years to materialize. Refinery utilization rates in the U.S. have been consistently above 95% for three months, nearing historical highs, with total utilization at 98% at the end of August. U.S. gasoline and diesel exports have reached record levels, helping to mitigate a broader global fuel crisis. Phillips 66 noted significant global refining capacity deficits and expects high turnarounds in the coming years, suggesting current utilization levels may not be sustainable.