Oil Majors Refuse to Build New Refineries, Fuel Shortages May Persist Until 2027
nashnova research
The five oil majors posted a combined $50 billion in quarterly profit — a record — yet none will build new refining capacity, and the IEA expects the global diesel shortage to persist through 2027.
$50 billion in profit — where is the money going?
ExxonMobil, Chevron, BP, Shell and TotalEnergies reported combined Q3 net profit exceeding $50 billion, a historic high.
None is directing funds toward new refineries. Shell raised its quarterly buyback to $5 billion; Exxon committed to another $20 billion in buybacks by 2027; BP is using surplus profit to pay down debt.
This means → shareholders are capturing the wartime windfall, while the global refining shortfall receives zero new capital.
Why did refining capacity suddenly fall short?
Supply took a double hit: Iran's war blocked the Strait of Hormuz, and Ukraine's strikes on Russian refineries continue. Roughly 10% of global refining capacity is now offline.
Export restrictions from Beijing and Moscow tightened the market further. Remaining plants are running at near-full capacity to maximize revenue in the high-price window.
In plain terms = a large chunk of the world's refining plant is gone, and the rest — running flat out — still cannot close the gap. That is why fuel prices stay elevated.
Why won't anyone build a new refinery?
Morningstar analyst Allen Good notes that long-term fuel demand is heading downward; a new greenfield refinery takes years to build, and "nobody believes current margins are sustainable in any way."
Exxon has capped refinery investment at $9 billion already earmarked over four years — expansions only, no new plants. BP CEO Meg O'Neill said the company will not add capacity "at this juncture."
This means → the majors' calculus is clear: once this price spike passes, fuel demand enters structural decline, and a new refinery becomes a stranded asset.
What are mid-size refiners doing?
Phillips 66 said it will concentrate investment on midstream logistics, spending only "tens of millions to hundreds of millions of dollars" on refining — small upgrades aimed at "incremental" capacity gains, not multibillion-dollar greenfield projects.
Valero bought an idled Houston refinery from LyondellBasell for $320.5 million, planning to restart 165,000 barrels per day of light-sweet crude processing by end-2027 at the latest.
In plain terms = the entire industry's posture is "patch and bargain-hunt" — no one is willing to break ground on a brand-new plant.
Where is new capacity actually going?
Dallas Fed data: since 2019, China and the Middle East have added 4.4 million barrels/day of refining capacity, while Europe and North America have shed 2.1 million barrels/day combined.
Nigeria, India and Mexico have all brought new refineries online recently.
This reflects a structural eastward shift in global refining. The West's supply gap is increasingly hard to fill domestically.
Where are oil and diesel prices headed?
Rabobank senior energy strategist Joe DeLaura forecasts Brent crude averaging $120 per barrel in H1 next year, with the diesel crack spread — the processing margin a refinery earns turning crude into diesel — holding near $100 per barrel.
He warned that further escalation in the Middle East would push prices higher still and export inflation worldwide.
The Trump administration, the G7 and the EU have all urged more refinery investment. The majors' answer is uniform: long-term demand is falling, and the economics of a new refinery do not work. Whether the supply gap can be meaningfully closed before 2027 remains an open question.
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