How are elevated refining margins impacting gasoline prices?

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Elevated Refining Margins Have Led to Increased Gasoline Prices

Higher refining margins have directly contributed to an increase in gasoline prices. The national average price at the pump has reached US$3.76 per gallon, representing an approximately 11 per cent rise compared to the previous year. This trend saw prices surge past US$5 in June, marking an all-time high.
Factors Contributing to Increased Refining Margins

The surge in refining margins is attributed to several factors, including operational difficulties at some refineries and the pandemic-induced closure or repurposing of others. The shuttering of some facilities and the conversion of others to produce renewable fuels instead of gasoline has reduced overall supply capacity. This, coupled with the general increase in crude and natural gas prices following Russia's invasion of Ukraine, has created a more constrained market.
Impact on Consumer Prices

The elevated refining margins have translated into higher gasoline prices, which have become a significant point of contention amidst rising inflation, particularly in the United States. This increase at the pump has been a focal point in discussions surrounding the midterm elections.
Industry Response to Market Conditions

In response to the current market dynamics, major oil companies like ExxonMobil and Chevron have reported record profits. While these companies have acknowledged the tight global gasoline market, described by Chevron's CEO Mike Wirth as having a "tightness we really haven’t seen probably in my career," they have maintained their capital discipline. This approach involves incrementally boosting production in areas like the US Permian Basin and continuing to return cash to shareholders through dividends and share repurchases, rather than initiating massive new projects.

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How are elevated refining margins impacting gasoline prices?

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