Disruptions in global energy markets that have squeezed fuel supplies are boosting profit margins for U.S. crude refiners.
Worldwide oil prices have held steady over the past month. Expectations of a potential U.S.–Iran settlement that would fully reopen the Strait of Hormuz and return to pre-conflict traffic volumes have prompted investors to anticipate lower crude costs.
A barrel of West Texas Intermediate—the U.S. benchmark for oil prices—is around $70 on the New York Mercantile Exchange. Brent, the global benchmark, is hovering at about $74 per barrel in overseas markets.
While fuel prices have been swiftly edging lower, they remain firmly above pre-war levels.
As of July 7, the U.S. national average for a gallon of gas and diesel is $3.79 and $4.76, respectively, according to the American Automobile Association.
Industry observers are keeping an eye on the 3-2-1 gasoline crack spread—the differential between crude, gasoline, and diesel prices—which is at a four-year high of about $60 per barrel.
“This divergence highlights a key market dynamic: while headline crude has given back much of its wartime premium, the product side continues to tell a story of tighter balances and better opportunities for refiners,” Phil Flynn, energy strategist at The PRICE Futures Group, said in a July 7 research note.
Historically, gasoline crack spreads often reside in the $10 to $25 range. Anything above $40 is considered immensely strong, signaling subdued inventory, robust demand, and tight global refining capacity.
Earnings indicate that U.S. Gulf Coast refiners—Marathon Petroleum, Phillips 66, and Valero Energy, for example—are using the current environment to their advantage, logging substantial profits and exceptional earnings.
The overall U.S. refinery utilization rate is above 96 percent, according to the Energy Information Administration. Some facilities are running at or near maximum capacity to ramp up production. Additionally, the four-week average of refinery crude throughput exceeds 20 million barrels per day.
The Neverending Supply Story
If the refining sector was tight in the first half of 2026, it will likely persist in the second half, says Sumit Ritolia, lead analyst for refining supply and modeling at Kpler.
Despite accelerated U.S. refinery output, domestic gasoline inventories have been edging lower during the Iranian conflict.
Total gasoline stockpiles are down 7 percent from a year ago to 212 million barrels, and market watchers say they could deteriorate further during peak summer demand.
Distillate supplies—diesel, heating oil, jet fuel, and kerosene—were little changed from last year at around 109 million barrels.
The current administration has been working to rebuild America’s refining infrastructure, which was built when the country depended on heavy crude.
It is estimated to process 1.2 billion barrels of U.S. light shale oil and produce 50 billion gallons of refined products.
Current refineries are equipped to handle heavier crude from countries such as Canada, Mexico, and Venezuela.
Shipments from Canada have been on an upward trajectory this century, reaching around 4 million barrels per day. Venezuelan crude exports have surged to nearly 15,000 barrels per day, the highest since January 2019, as Caracas revives its ailing energy industry. U.S. imports from Mexico have been steadily declining over the last two decades.
Various tailwinds are leaving the refining sector optimistic about the future.
“This is the time to be bullish on U.S. refining,” Brian Mandell, executive vice president of marketing and commercial for Phillips 66, said in an April earnings call with analysts.
“Refinery runs are strong. Consumer demand is healthy. Crude production is relatively stable. This highlights how we are immune to the crisis, although not to higher prices.”
Whether refiners can hold up under a potential glut and lower oil prices next year remains uncertain.
For now, investors agree with Mandell.
Shares of Marathon and Valero are each up about 60 percent this year. The Phillips 66 stock has surged 37 percent year-to-date.
