Oil giants report record profits amidst global supply disruptions

Recent financial reports from energy corporations reveal continued substantial profits, fueled by limited fuel availability and increased refining margins influenced by ongoing global conflicts.

Shell, BP, TotalEnergies, and ExxonMobil have all reported significant increases in refining margins, reflecting higher earnings from processing crude oil into gasoline, diesel, and jet fuel.

Chevron reported downstream earnings more than quadrupled to $4.9 billion compared to the previous year, attributing the increase to higher sales margins.

The constrained supply of refined fuels is compounded by refinery output reductions worldwide, despite oil companies operating near full capacity.

Disruptions stem from Ukrainian drone attacks on Russian refineries, instability in the Middle East linked to the Iran conflict and Houthi attacks on Saudi Arabia, and refinery closures in Europe and North America.

European Commissioner for Energy and Housing, Dan Jørgensen, warned of an energy security “crisis,” noting that roughly a quarter of refineries in the European Union have closed in the past two decades.

Higher crude oil prices have also contributed to increased earnings for integrated oil companies.

These profit levels are reminiscent of the energy crisis experienced in 2022 following Russia’s full-scale invasion of Ukraine, contrasting with consumers facing elevated energy costs.

Analysts suggest that interventions to control prices, such as releasing diesel stockpiles and agreements to increase diesel supply, may have limited effect unless supply increases substantially, demand decreases, or global tensions subside.

Raphael Portela, director for corporate strategy and analytics at Wood Mackenzie, explained that crude oil is still leaving the Gulf region, but at a significantly higher shipping cost, and that the refined products typically derived from that oil are scarce.

Portela stated that resolving the current situation requires increased crude oil availability for the global refining sector, including the resumption of Gulf refinery operations and the return of Russian exports. He added that a resolution to tensions in the Hormuz Strait could quickly impact market sentiment, but physical supply tightness is expected to persist until 2027.