Exxon, Chevron warn fuel prices to endure as war knocks refining

High fuel prices are likely to stick around even if oil prices drop in the coming months as the wars in Russia and Middle East leave global refining capacity critically short, ExxonMobil Holdings Corp. and Chevron Corp. warned. 

Gasoline, diesel and jet fuel prices typically rise and fall with crude oil. But that link is growing tenuous because so many refineries have been knocked offline, causing fuel prices to remain stubbornly high and accelerating inflation even as oil falls.

“The constraint pain point in the energy system is refining,” ExxonMobil Chief Financial Officer Neil Hansen said in an interview. It’s “something that perhaps the market isn’t fully focused on.” 

Nearly 10% of the world’s ability to refine crude oil is effectively offline with the Strait of Hormuz largely closed, continued Ukrainian attacks on Russian refineries and China’s export ban, according to Melius Research. It means the refineries left are running flat out to meet demand, rendering them unable to produce more fuel even if the oil is available for them to process. The result is record-high fuel-making margins that benefit refinery owners but drive up costs for consumers. 

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