Refiners eye record profits as diesel shortage stretches into 2027

Trump’s Russian diesel deal criticised as too little, too late

The widening gap between crude oil and refined-fuel prices has handed integrated refiners a windfall as global diesel supplies tighten. Companies are benefiting from the spread between a barrel of crude oil and a barrel of refined fuel. The Brent crude benchmark eased to oscillate around the $100-a-barrel level in recent weeks, helped by an uptick in cargoes leaving the Gulf region, though fears that the Middle East conflict could escalate have pushed it back above $106. Fuel exports have remained constrained and global stockpiles of diesel, gasoline and jet fuel have continued to shrink. The squeeze means that while oil prices are lower than feared at this point, the cost of diesel is far higher.

“I prefer the world of disruption to the peaceful world,” TotalEnergies chief executive Patrick Pouyanné said last week. He said the energy crisis ignited by almost eight months of war in the Middle East had provided “plenty of opportunities if you’re able to capture them.”

TotalEnergies’ refining and chemicals business recorded income that more than quadrupled to $1.8 billion (£1.35 billion) between April and June, delivering the French company its strongest quarterly profits in three years.

“We’re doing really well by being integrated,” Pouyanné said. “Integration means your refineries in Europe, which you thought were liabilities, are suddenly becoming goldmines.”

Shell told investors last week it expects to make record profits from each barrel of fuel produced over the last three months. The company, which reported its second-highest quarterly profit ever over the summer, forecast refining margins would nearly double to $42 per barrel of refined product in the July-to-September period, up from $24 per barrel in the second quarter.

The biggest windfalls are likely to flow to Marathon Petroleum, Valero Energy and Phillips 66, whose market values have more than doubled since the start of the crisis. The three US-listed refiners’ stocks have climbed by a combined $215 billion this year as their shares reached successive record highs. US fuel-product exports have risen more than 50% over the past year, from about 1.25 million barrels a day to an all-time high of 1.9 million barrels a day over the summer, effectively offsetting losses from Gulf refineries.

The IEA said Wednesday that the global fuel shortage would stretch into next year despite plans to ease trade sanctions or release emergency stockpiles. “Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation,” the agency added.

Days earlier, US President Donald Trump announced a deal to import Russian diesel into the United States in an effort to lower pump prices. The temporary sanctions reprieve was criticised as “too little, too late” given the record prices triggered by the shutdown of war-damaged refineries in the Middle East and Russia, once the world’s second-largest diesel exporter behind the US.

BP chief executive Meg O’Neill, who officially stepped into the top job in April, described how its refineries had adapted to shifting demand fronts. “If you go back to March and April, the first front of shortage risks was in Australia, where they were very worried about diesel and diesel availability; and you might have seen news coverage of petrol stations being out of diesel. Our team responded very quickly,” O’Neill said at an industry conference in London.

BP shipped diesel to Australian customers from its Rotterdam refinery in the Netherlands and its Cherry Point refinery on the US west coast, then shifted production to produce 30% more jet fuel in May than before the conflict when Europe faced a jet-fuel shortage. Most recently, O’Neill said, BP’s refineries have “adjusted back to try to max diesel.”

Diesel accounts for about 10% of global energy consumption, known as a “workhorse” fuel for its role powering equipment vital to agriculture, mining, manufacturing, shipping and logistics. By last month, supplies into the global market had fallen by about 1 million barrels a day from their 2025 level, owing to damage to refineries in the Gulf and Russia and export restrictions from China.

The soaring costs for businesses and consumers have economists worried, already piling pressure on areas of the global economy from US farmers in the midwest corn belt to local bus operators in England. Many fear a broader impact, as fuel prices raise the cost of food, goods and transport across the economy.

Not all refiners have benefited. According to the IEA, many are shouldering “crippling” crude costs and fast-rising supertanker charter costs while manufacturing products such as naphtha and gasoline, where prices remain well below the highs for the more constrained fuels. The profit margin for refineries in northwest Europe, known as the “crack spread,” has fallen from $54 a barrel at the start of September to as low as minus-$11 a barrel earlier this month.

The IEA projected the shift to diesel could produce a surplus of the fuel by early next year while creating the conditions for the next fuel squeeze — gasoline. If refineries producing gasoline are forced to lower their run rates to avoid spiralling losses, the agency warned, petrol pumps could become the next frontier of the crisis.