U.S. gas averages $4.06 a gallon as Trump presses oil companies
The Iran war and Ukrainian strikes on Russian refineries have knocked out a large share of the world’s fuel-making apparatus, leaving the U.S. oil industry as the world’s last major fuel supplier and forcing American refiners to run their plants at full capacity to meet demand at home and abroad. Fuel prices have soared worldwide, lifting refiners’ profits and drawing criticism from President Trump, who this week criticized major oil companies for their earnings.
The average U.S. gasoline price reached $4.06 a gallon as of Thursday. Trump said in a Fox News interview on Tuesday that negotiators were close to a deal with Iran that could open the Strait of Hormuz, 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.
American fuel factories used 97.2% of their operable capacity in late July, a level last seen in 2018, according to federal data. 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 the Energy Information Administration.
The White House is focused on inflation and affordability issues heading into the November midterm elections, and high diesel prices can boost the price of everything from groceries to lumber. 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.
The supply shock has multiple sources. 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. The Iran conflict has stymied traffic in the Strait of Hormuz, a vital artery for oil voyages from Gulf countries, and 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.
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.
“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.”
The earnings reflect the crunch. 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. Shares of Marathon and Valero are up about 85% so far this year, and Phillips 66 stock is up nearly 60%.
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 declined. 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 at full capacity, U.S. inventories are still dropping because of strong 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.
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.
The U.S. refining base has shrunk over time. More than two dozen refineries have shut down around the U.S. since 2000, including a few large ones on the West Coast, and 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.