Exxon, Chevron Warn War-Battered Refining Capacity Keeps Fuel Prices Sticky

The two largest U.S. oil producers, ExxonMobil (XOM) and Chevron (CVX), warned in their second-quarter earnings reports that fuel prices could stay elevated for months even if crude declines, as wars in Russia and the Middle East have left global refining capacity badly short.^[Fortune] As of the July 31, 2026 close, ExxonMobil (XOM) sat at $155.44, down 0.97% (-$1.53) from the prior close of $156.97, after opening at $153.74, hitting a high of $156.16 and a low of $152.14. With U.S. markets shut for the weekend, the quote reflects the prior session's close, with no pre-market or intraday movement. Chevron (CVX), meanwhile, rose about 2% after its report.^[AOL]

War Hits Refining Capacity, Fuel Prices Decouple From Crude

Gasoline, diesel, and jet fuel prices typically track crude, but that link is fraying. Multiple refineries have been forced offline by war, keeping fuel prices stubbornly high and feeding inflation even as crude slides.^[Fortune] ExxonMobil CFO Neil Hansen said in an interview: "The pain point in the energy system is in refining," calling it "a problem the market may not be paying enough attention to."^[Fortune]

According to Melius Research, nearly 10% of global refining capacity is effectively offline due to the near-total closure of the Strait of Hormuz, Ukraine's sustained strikes on Russian refineries, and China's export ban.^[Fortune] That means the refineries still running are flat out just to meet demand — even with crude available to process, they can't squeeze out more fuel. The result: refining margins at record highs, a windfall for refinery owners but a hit to consumers.^[Fortune]

ExxonMobil CEO Darren Woods stressed on the earnings call that available global refining capacity relative to demand is at the lowest level he's ever seen. "All of this supply is disrupted, and frankly, we're well below the available capacity I've seen," Woods said. "It's going to take the industry a while to dig out of this hole."^{[Energy News Beat]} He noted that Iran's effective closure of the Strait of Hormuz has taken roughly 3 million barrels per day of refining capacity offline, and combined with China's restricted refined product exports and Ukraine's ongoing strikes on Russian refineries, at least 5 million barrels per day of capacity is down.^{[Energy News Beat]}

Q2 Refining Profits Soar, But Results Diverge

Both companies reported big jumps in second-quarter refining profits on Friday, driven by falling fuel inventories, China's export curbs, and Russian refinery outages that pushed margins higher.^[AOL] Exxon's adjusted downstream earnings rose to $4.1 billion, with its U.S. refineries running at high utilization and record diesel output in the quarter.^[AOL] Chevron's U.S. refinery throughput hit a record, exceeding 1 million barrels per day, with utilization above 97%.^{[Energy News Beat]}

But the two diverged. Exxon's Q2 earnings came in slightly below consensus, while Chevron beat expectations.^[AOL] RBC Capital Markets analyst Biraj Borkhataria noted in a research note that given Exxon's massive refining footprint, some investors may have expected even stronger refining results.^[AOL] After the reports, Exxon shares fell 1%, while Chevron rose about 2%.^[AOL]

Gasoline Back Above $4, Political Pressure Builds

The average U.S. retail gasoline price crossed back above $4 a gallon last week, frustrating drivers and politicians alike — including President Donald Trump, who has spent recent weeks criticizing big oil companies for not cutting prices fast enough.^[Fortune] Even with West Texas Intermediate (WTI) down 26% from its 2026 high, retail gasoline is only 10% below its May peak.^[Fortune] Goldman Sachs analyst Neil Mehta put it simply: "Refining is clearly the bottleneck in the oil system right now, with margins exceptionally high."^[Fortune]

The political fallout from high pump prices is landing on Trump and the GOP as they campaign to hold their congressional majorities in November's midterms.^[AOL] Chevron CEO Mike Wirth said on the earnings call: "We expect upward pressure on refined product prices to continue into the third quarter and beyond," adding that demand for distillates like diesel and heating oil is unlikely to fall off over the long term.^[AOL]

Refineries Run Flat Out, Maintenance and Outage Risk Rise

U.S. refineries are running near maximum capacity, with recent data showing utilization around 97% of operable capacity — helping fill part of the global gap but leaving almost no spare cushion.^{[Energy News Beat]} U.S. refiners deferred much of their routine spring maintenance to chase strong margins and demand, with average downtime in the first half running well below recent norms. That high utilization raises the risk of unplanned outages, especially with hurricane season underway and a more normal maintenance cycle expected in the second half of 2026 and beyond.^{[Energy News Beat]}

Chevron said planned Q3 downtime is expected to cut downstream earnings by $175 million to $225 million. Exxon, meanwhile, said planned maintenance in Q3 will be lighter than in the prior three months.^[AOL] Exxon CEO Darren Woods said restoring shipping through the Strait of Hormuz is critical to getting more crude to market. "The utilization rates we're seeing are not sustainable over the long term. So I think this refining challenge is going to be with the world for a while," he told CNBC.^[AOL] Woods added that the company has the largest refining footprint outside China, and that crude supply disruptions have added to downstream difficulties.^[AOL]

Global diesel and heating oil supplies look especially tight as countries stock up ahead of winter. Wirth doesn't expect the squeeze to ease soon, but said there's little evidence so far of lasting structural demand destruction.^{[Energy News Beat]} Exxon's refineries posted record diesel output in Q2, and Woods expects "a very strong refining market with very high margins," stressing that shortages could "have a significant impact on consumers and their wallets" even as the company works to maximize production.^{[Energy News Beat]}

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