WSJ What’s News
War Leaves U.S. Oil Refiners With Massive Profit Gains
· Summarized
Key takeaways
- The crack spread—the difference between refined-fuel prices and crude-feedstock costs—is the main driver of refiners’ record profits.
- Diesel and jet fuel are tighter than gasoline, with Middle Eastern and Russian refinery disruptions creating the most significant supply losses.
- U.S. refiners are operating at full capacity and expanding Gulf Coast capacity because global export demand can offset weaker domestic fuel demand.
Summary
Refiners more than doubled their previous records
Pierre Bien-Aimé explains that U.S. refiners are profiting because crude oil prices rose more slowly than refined-fuel prices, creating a wider “crack spread.” John Auer of Novi Labs says refiners have more than doubled the records set after the COVID lockdowns: Marathon earned nearly $10 billion in refining operating profit and Valero nearly $9 billion, while Marathon’s net income reached almost $7.5 billion.
Diesel and jet fuel shortages widened the crack spread
Auer says the crack spread is essentially a refinery’s gross profit margin, and Valero’s Gulf Coast spread averaged about $47 a barrel in the third quarter versus roughly $30 three months earlier. The largest gains are in middle distillates—diesel and jet fuel—because war in Iran has crippled Middle Eastern refineries and Ukraine’s attacks have taken about half of Russia’s refining capacity offline.
U.S. refiners are running full tilt to replace lost supply
ExxonMobil CEO Darren Woods estimated that about one-third of the shortage comes from the Middle East’s inability to export clean products, while Auer ranked the Middle East as the biggest problem, followed by Russia and Ukraine. U.S. exports have risen 400,000–500,000 barrels a day since 2025, but that remains below the 3–4 million barrels a day lost from those regions; refiners have increased middle-distillate exports nearly 30% in a year. Auer expects 400,000 barrels a day of additional Gulf Coast capacity through 2040, despite declining domestic demand, because export markets are still growing.
Sponsors
- Octave · Octave says it transforms data into lifecycle and contextual intelligence for the world’s mission-critical industries, under the message that connecting data amplifies possibility.
- Baird Private Wealth Management · Laura Thurow says healthcare can be a major expense now and later, and that long-term-care insurance or a smart health savings account strategy can help protect savings and investments.
Show notes
Bonus Episode for Nov. 4. Refiners turn the crude oil pumped from the ground into products cars, planes and trains can use. Conflicts in the Middle East and Ukraine have damaged regional energy sectors, prompting U.S. companies like Marathon Petroleum, Phillips 66, and Valero Energy to run at full tilt in an effort to fill a global shortage—and earning them huge profits.
Pierre Bienaimé hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy.
Sign up for the WSJ's free Markets A.M. newsletter.
Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.
Follow this show on AudioBrevity and new episodes get summarized for you. Create a free account