The world's shrinking spare capacity to produce gasoline and diesel is running up against the White House's desire to temper the rise in pump prices ahead of the midterms.
The chief executives of Exxon Mobil and Chevron warned Friday that refineries that produce gasoline and diesel are already running at full tilt and can't be turned up much more to make up for global shortages due to the war in Iran and other geopolitical hotspots. That could mean higher prices for consumers at the pump in the coming months, they said.
Exxon Mobil CEO Darren Woods said the company would "push as hard as we can" to increase fuel production given that higher energy prices have a "significant impact on consumers and people's pocketbooks."
"With all that supply out, we're well below available capacity, frankly, that I've ever seen," he said on the company's earnings call. "It's going to take a while for the industry to kind of climb its way out of that hole."
Their remarks come as the Trump administration is racing to blunt the impact of elevated gasoline prices with three months until Americans go to the polls. The American Automobile Association reported nationwide pump prices were averaging $4.10 per gallon — nearly a dollar more than the same period last year. Refineries in the United States, meanwhile, operated at roughly 97 percent of their operable capacity this month, the U.S. Energy Information Administration said this week, while Shell reported Friday that it was running its refineries at record rates actually above their official capacities during the second quarter.
POLITICO reported this week that the Trump administration is in talks with potential investors who could help bring idled refineries back online to help ease fuel price increases. And analysts have warned that refineries' high operating rate leaves little room for operational disruptions, even as refiners have delayed scheduled maintenance and hurricane season looms.
The White House did not immediately respond to a request for comment on Exxon and Chevron's remarks.
Woods said he had "never seen" the world's available refining capacity as low as it is today relative to demand. Iran's closure of the Strait of Hormuz has removed 3 million barrels per day of refining capacity, while China and Russia have limited product exports, the latter because of a sustained Ukrainian bombing campaign on its refineries. In all, at least 5 million barrels a day of capacity was offline, Woods said.
Exxon's refineries produced record amounts of diesel in the second quarter, and Woods said he expects to continue to see a "very robust refining market with very high margins" in the coming months.
Chevron, too, said its refineries are running at record rates and it did not expect the supply crunch to ease anytime soon.
"The question is, 'When do we get crude flows reestablished? And when do those cracks come back in?' Hard to say," CEO Mike Wirth said on the company's earnings call. "I think we're going to see some upward pressure on product pricing here into the third quarter and perhaps beyond that."
Chevron on Friday said its refinery crude unit throughput was 1.07 million barrels a day, "reflecting reliable crude unit capacity utilization of more than 97 percent."
Wirth said global supplies of diesel and heating oil are looking particularly tight, especially as countries start to stockpile ahead of the winter heating season.
"European diesel demand was weaker in the second quarter, which I think is what really kept global inventories from drawing further than they did," he said. "That may not hold up as we get into the third quarter."
Wirth said, however, he did not expect the current crisis would have a long-term impact on demand for petroleum products.
There's likely some demand destruction in Asian markets in the short-term, "but in terms of long-term structural demand destruction, I would say it's hard to find evidence of that at this point," he said.