Middle East Conflict Drives Refining Margins to Record Highs; Shell and Other Majors See Q2 Earnings Surge
Miles Bennett
Iran's war has choked the Strait of Hormuz, squeezing refined-product supply worldwide and pushing refining margins to all-time highs; Shell, TotalEnergies, ExxonMobil, and Chevron all posted blowout Q2 results — the real pinch is not crude prices but the fact that gasoline and diesel are scarcer than crude itself.
Why are refined products tighter than crude?
The Hormuz blockade has curtailed crude shipments, but refinery output and product supply have recovered far more slowly than crude deliveries.
This means → even with crude briefly topping $100 a barrel, the shortage in gasoline, diesel, and jet fuel is worse than in crude itself — refiners profit from that gap.
IEA chief Fatih Birol issued a rare public warning: "Oil-product security must not be taken for granted." Put simply = the world's top energy watchdog is openly flagging that refined-product tightness has reached alert level.
Why is supply being squeezed from multiple directions at once?
Three forces are stacking: the Iran war blocking the strait, Russia's diesel-export ban, and Russian refinery shutdowns — the second time this decade that war has reshaped global oil-product markets.
Chevron CEO Mike Wirth singled out middle distillates — the product range between gasoline and heavy fuel, including diesel and jet fuel — as "the tightest barrel right now."
Europe is heading into winter heating-oil restocking season. This means → diesel demand will climb from its relatively soft Q2 level, and supply pressure shows no near-term relief.
How much did the majors actually earn?
Shell: Q2 profit more than doubled year-on-year; refinery utilization hit 102%; refining margins rose from $17 to $24 per barrel quarter-on-quarter; chemicals margins doubled from $139 to $270 per tonne.
TotalEnergies: adjusted net income up 68% YoY to $6 billion; European refining benchmark margin reached $12.4/bbl, nearly triple the $4.3 of a year earlier.
Chevron: refinery throughput hit a record above 1 million barrels per day. ExxonMobil likewise posted its highest earnings in years. In plain terms = all four supermajors set records, with refining as the profit engine.
Why did Trump publicly criticize the oil companies?
Trump accused the majors of "making too much money" and demanded they "give some of those profits back to the public — prices at the pump and for consumers must come down."
This reflects a political reality: the higher oil-company profits climb, the more consumers feel the squeeze at the pump — and in an election cycle, that is a political time bomb.
The companies' response was unambiguous: Shell CEO Wael Sawan called refining performance "outstanding"; TotalEnergies CEO Patrick Pouyanné said his team "captured market conditions in an excellent manner" — no hint of price concessions.
What is the biggest variable going forward?
All four majors expect refining to keep delivering outsized profits in the near term, because product-supply constraints and capacity distortions are not going away.
Chinese demand is the market's largest unknown: a rebound in China's economy would pull product imports higher and tighten the global balance further; weak Chinese demand is the only factor that could meaningfully ease the strain.
This means → investors should watch two lines: the transit status of the Strait of Hormuz and China's refined-product import data — these two variables determine how long the refining windfall lasts.
Content is for reference only, not financial advice.