Oil majors are using their war-driven windfall profits to reward shareholders and pay down debt rather than invest in new refineries, despite calls from political leaders to bolster the West's refining capacity. Exxon Mobil, Chevron, BP, Shell and Total Energies posted combined third-quarter net income of more than $50bn this week as global prices of petrol, diesel and jet fuel remained near record highs. Shell raised its buyback to $5bn for the current quarter and Exxon committed to another $20bn programme for 2027, while BP's windfall profits are largely going into debt reduction.
Profits were driven higher by refining divisions running at nearly full capacity. About 10 per cent of global refining capacity has been taken offline this year following the start of the Iran war and Ukrainian attacks on Russian refineries, while Beijing and Moscow's export restrictions have tightened the market further. Industry bosses said the conditions driving up margins would remain for some time, and the International Energy Agency has predicted the diesel shortage would last into 2027.
US President Donald Trump has urged companies to boost domestic refining supply chains and called oil bosses to a White House meeting in September, while G7 and EU leaders have also pushed for more investment. The majors have made small upgrades to existing refineries to increase yields, but have held back from costly new facilities that would take years to come online. Morningstar analyst Allen Good said that because fuel demand is projected to eventually decline, "no one is going to build a greenfield refinery in Europe and the US, given the time it would take."
Exxon said it would not increase refining investment beyond the $9bn already earmarked for the next four years, while BP said it would not add capacity "at this point in time." Meanwhile, investment has continued elsewhere: since 2019, China and the Middle East have added 4.4mn b/d, while Europe and North America shed 2.1mn, according to the Federal Reserve Bank of Dallas.
Source: Financial Times Companies · Summarized by HeadlinesBriefing