Why Big Oil Says High Fuel Prices Are Here to Stay

Western majors have structurally downsized over the long term. Combined refining volumes for BP, Chevron, Exxon, Shell, and TotalEnergies fell from 16.4 million bpd in 2005 (representing about 22% of the global total) to 10.4 million bpd in 2025 — a 37% decline, according to Reuters Open Interest calculations . This long-term retrenchment leaves the system with zero spare capacity to absorb shocks.

What the Companies Are Saying

ExxonMobil

ExxonMobil's leadership has been blunt about the severity of the situation. CEO Darren Woods said available global refining capacity relative to demand is lower than he has ever seen: "With all that supply out, we're well below available capacity, frankly, that I've ever seen" . Woods added that the decoupling between crude prices and fuel prices is growing more persistent and that the challenge "will remain for a while" . Exxon posted record diesel output in Q2, yet warned that nearly 10% of global refining capacity is effectively out of commission . CFO Neil Hansen stated plainly: "The constraint pain point in the energy system is refining" .

Chevron

Chevron CEO Mike Wirth warned of "upward pressure on product pricing into the third quarter and perhaps beyond," noting that demand for distillates including diesel and heating oil is unlikely to decline over the long term . Chevron's U.S. refineries ran at record levels of over 1 million bpd, yet the company said big fuel margins will persist amid energy "stress" . "The buffers and the shock absorbers are being steadily drawn down, and the ability for the market to absorb this imbalance is drastically diminished today versus where we started," Wirth said at a conference .

Shell

Shell joined the chorus of warnings that pump prices will stay higher regardless of where crude oil trades . Shell CEO Wael Sawan warned at the CERAWeek conference that tightening jet fuel supplies would cascade into diesel and gasoline: "Jet fuel is already being impacted. Diesel will be next to come after that will be gasoline" . Shell ran its refineries at 102% of capacity during the second quarter — eking out more jet fuel and diesel to take advantage of soaring prices — but that leaves virtually no room to absorb further disruptions . Shell increased jet fuel production by about 20% in response to price signals, but this comes at the expense of diesel and gasoline output .

Diamondback Energy

Primarily a shale producer, Diamondback Energy reported lower prices for its crude production in Q4 2025 due to oversupply fears, with the average price it received falling to $58.00 per barrel from $64.60 in the prior quarter . This contrasts sharply with the refining bottleneck narrative: the problem is at the refinery gate, not the wellhead.

Depleted Inventory Buffers

Gasoline and diesel inventories sit near multi-year lows in key regions . Even when crude prices soften, fuel prices remain stubbornly high because the bottleneck is in the refining step, not crude supply. Analysts at Sparta Commodities summarized: "There's just not enough refining capacity left globally to deal with all this" .

Refinery utilization is maxed out. U.S. refineries ran at 95% to 97% of operable capacity in the second quarter, with Shell reaching 102%, leaving "virtually no room to increase output" . The EIA reported that U.S. refineries operated at roughly 97% of their operable capacity in late July .

Evidence from Economic Analysts

European Central Bank (ECB)

A July 31 ECB blog post found that near-record refining margins have contributed significantly to the rise in euro-zone fuel prices. For diesel, refining margins added €0.10 per liter to retail prices before the Iran war — a figure that rose to €0.35 per liter in the first three weeks of July. For petrol (gasoline), the increase was from €0.04 per liter in February to €0.23 in July. The ECB warned that a further margin increase is likely in August before any retreat .

TD Economics

In its April 2026 "Dollars & Sense" report, TD Economics noted that gasoline and diesel prices had surged 38% and 43%, respectively, since late February, driven by the refining crunch . TD also reported a 30% increase in diesel prices and shortages in jet fuel filtering into consumer prices, with a crude supply shock boosting CPI inflation to an expected 3.6% in the U.S. and 2.7% in Canada for 2026 . TD's baseline oil price forecast assumes crude prices will average around $96/bbl in Q2 before easing toward $80/bbl by year-end, but this is predicated on de-escalation that has not yet materialized .

The Structural Pressure on Diesel and Gasoline

Diesel is particularly tight because the refineries that produce middle distillates are the ones most affected by war damage and capacity closures. European diesel refining margins hit a record high of over $60 per barrel in July . European low-sulphur gasoil futures' premium over crude oil — which captures the profit margin refiners make from producing diesel — extended its all-time highs to $74.66 per barrel .

The traditional link between crude oil and fuel prices is breaking. Exxon and Chevron explicitly warned that even if crude prices fall, gasoline, diesel, and jet fuel prices will not follow suit because the constraint is in the refining link of the chain — not the upstream crude supply . As the Business Times summarized: "Nearly 10% of the world's ability to refine crude oil is effectively offline" .

No quick fix is visible. New refinery construction takes years, existing plants are operating at maximum rates, and war-related outages have no near-term resolution timeline. Exxon's Darren Woods said, "It's going to take a while for the industry to kind of climb its way out of that hole" . The structural deficit is expected to persist for at least several quarters, keeping margins elevated and pump prices high .