US Refiners Face Historic Pressure as Global Fuel Crisis Deepens

U.S. oil refineries are operating at exceptionally high levels as the global energy market struggles with disruptions caused by the war involving Iran, damage to Russian refining facilities and the closure of the Strait of Hormuz.

According to Reuters, U.S. refinery utilisation has remained above 95% for 11 consecutive weeks — a level not sustained for more than 25 years. Refiners have increased production and exports of crude oil, gasoline, diesel and jet fuel to help compensate for shortages elsewhere.

The surge has also generated unusually high profits. Refining margins have averaged more than $50 per barrel since the conflict began, more than twice the 10-year average. Major companies including Valero, Phillips 66, Marathon Petroleum and Exxon Mobil have reported record or near-record second-quarter earnings.

However, the intense production pace is creating a major risk. Some refiners have postponed planned maintenance to keep their facilities operating at maximum capacity. Industry experts warn that prolonged high utilisation could increase the chances of equipment failures, accidents and unexpected shutdowns.

History shows that similar periods of extremely high refinery utilisation have sometimes been followed by sharp production declines when plants were forced into emergency maintenance.

The situation is particularly concerning because global refining output is already estimated to be nearly 2 million barrels per day below demand. Damage to refineries in Iran and Russia could keep global processing capacity reduced for years.

U.S. refiners are therefore increasingly acting as a supplier of last resort for the global fuel market. But Reuters warns that if even a small number of major U.S. refineries experience serious disruptions, an already fragile global fuel market could deteriorate into a much wider supply crisis.

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