US refiners reap windfall profits as wars push up fuel prices for consumers

US refiners are on course to report a more than fourfold increase in profits due to surging diesel and petrol prices caused by Donald Trump's Iran war and Ukrainian attacks on Russian energy facilities.

Eight listed independent US refiners are expected to report combined profits worth $32.4bn in the two quarters since the war began, compared with $6.8bn in the same period last year.

Revenues are forecast at $325.5bn versus $242.9bn last year, according to an FT analysis of each company's second-quarter results and Wall Street's expectations for the third quarter.

The Iran war and Ukrainian drone attacks on Russian refineries have pushed up global fuel prices to near-record levels. Despite increasing domestic production, the US has not been immune to the energy shock, with diesel prices surging by more than $2.50 to $6.38 per gallon since the US and Israel attacked Iran on February 28.

While record oil producer profits have attracted notice, the conditions have also created a windfall for the oft-overlooked refining segment of the energy industry, which has undergone a stunning reversal of fortune after years struggling with tight margins and cut-throat competition from Middle Eastern and Asian rivals.

"We are seeing a drastic change in financial performance for US refiners because of the huge disruption caused to fuel supplies from conflicts in the Middle East and Russia," said Arne Skjæveland, analyst at Rystad Energy.

He said refiners' profit margins were approaching levels last seen during the energy crisis sparked by Russia's full-scale invasion of Ukraine in 2022 and were likely to stay elevated because of continued geopolitical instability.

Refiners have faced higher input costs from rising crude prices since the war began, but the value of refined products has risen even more, pushing the price premium -- known as "crack spreads" in industry jargon -- to record levels.

The three biggest independent refiners, Valero, Marathon Petroleum and Phillips 66, are expected to generate net income of $8.7bn, $10.9bn and $7.9bn respectively in the six months to end September. And for the first time in a year, all eight refiners are expected to make a profit in the third quarter, as they raise output to record levels to meet a global shortfall of diesel and other products.

Valero, Marathon and Phillips did not respond to requests for comment.

US refinery output hit a five-year high of 17.4mn barrels per day in August as they ran above 95 per cent of capacity for 15 straight weeks, the longest stretch since 1998, according to Rystad Energy, a research group.

US exports of diesel, petrol, jet fuel and naphtha increased to 2.8mn barrels per day in August from 2.3mn a year earlier, as European and Latin American customers raced to find alternative supplies because of restricted flows from the Middle East and Russia.

ExxonMobil and Chevron, which own a large number of US refineries, as well as oil and gas production facilities, are also enjoying a profits bonanza. Chevron reported its highest quarterly profit on record in three months to end June, while Exxon reported its highest quarterly profit since 2022.

The windfall profits boost has sparked calls for government intervention, such as a ban on diesel exports or windfall taxes that the oil industry warns would cause long-term damage to the sector.

Democrats have called on Congress to pass the Big Oil Windfall Profits Tax Act, which would impose a tax on oil company profits and redistribute the income raised in the form of tax credits to consumers.

"Big Oil and President Trump don't care that you are paying 50 per cent more for gas this Labor Day weekend because they are profiting from these prices. It's wrong. That's why I'm pushing for the Big Oil Windfall Profits Tax Act," Senator Richard Blumenthal, a co-sponsor of the bill, said at a public appearance last month.

And in an unusual intervention by Republican legislators, some members of Congress from agricultural states called for a diesel export ban, which they hope would at least in the short term bring down prices for American farmers.

The Trump administration is considering a range of options to tackle soaring diesel and petrol prices, which have dented the president's approval ratings just five weeks before November's midterm elections.

But it has so far resisted pulling the trigger on an export ban, which energy analysts have said could prompt refiners to slash production and force up the prices of other products such as petrol and jet fuel.

The oil industry has defended its response to the surge in diesel prices, arguing that it has done everything it can to increase production and is not responsible for the conflicts in Iran and Russia.

Dustin Meyer, senior vice-president of policy at the American Petroleum Institute, said refining was a cyclical business where success was measured in decades, not quarters.

"Today's higher prices reflect unprecedented disruption to global refining capacity -- not the actions of individual companies. US refiners are running near maximum capacity to meet demand while investing in the infrastructure and resilience that strengthen America's long-term energy security."