Geopolitical conflicts ignite a refining surge: five oil giants rake in US$56.3 billion in a single quarter.

Conflicts in the Persian Gulf and Russia have roiled energy markets and driven refining performance to record highs, allowing oil giants to reap more than US$50 billion in windfall profits. Exxon Mobil Corporation (XOM.US), Chevron Corporation (CVX.US), BP p.l.c. Sponsored ADR (BP.US), Shell (SHEL.US), and TotalEnergies (TTE.US) all beat expectations in the third quarter, with combined adjusted net income reaching US$56.3 billion, underpinned by an unprecedented fuel supply crisis that pushed retail fuel prices to historic highs. The pain felt by drivers at the pump is delivering excess profits to the oil supermajors, while also stoking discontent as U.S. President Trump and his Republican Party prepare for the midterm elections, which will determine control of Congress. American voters continue to rank the cost of living as their top concern, and high fuel prices are turning traditionally Republican strongholds such as Texas, Kansas, and Alaska into swing states. International oil prices have risen nearly 60% since the U.S. and Israel attacked Iran in late February, and refining has become another bottleneck in the global energy supply chain. The Middle East conflict and the Russia-Ukraine conflict have idled about 10% of the world's fuel manufacturing capacity, generating huge profits for refineries still in operation. Exxon Mobil Corporation said in a statement on Friday that its refining division posted record third-quarter earnings of US$9.05 billion, nearly five times the level of a year earlier. Chevron Corporation's refineries earned US$4.93 billion in the same period, the highest ever and four times the level a year earlier. More than half of BP p.l.c. Sponsored ADR's US$8.46 billion in adjusted net income came from the division that includes refining and trading. Earlier this week, Shell and TotalEnergies also reported strong results. Exxon Mobil Corporation shares rose 1.6% in premarket trading in New York, Chevron Corporation rose 1.3%, BP p.l.c. Sponsored ADR rose as much as 1.8% in London, and Shell and TotalEnergies also advanced. At a rally in Texas this week, Trump played down concerns about gasoline and diesel prices, saying they would fall "soon." Average fuel prices during his second term are higher than under his predecessor Biden. A few days earlier, he praised U.S. oil companies for making the country "a lot of money," a clear shift from his criticism this summer that they were "making too much." However, as the Iran conflict enters its ninth month, there is little sign of easing in disruptions to the global energy market despite an increase in vessels passing through the Strait of Hormuz. So far, the market has relied heavily on strategic and commercial inventories for supply. But as those buffers are gradually depleted, price volatility is expected to intensify. Exxon Mobil Corporation, which operates the largest refining system outside China, reported the fourth-highest overall profit in the company's 156-year history. Third-quarter adjusted earnings per share were US$4.23, 10 cents above the average analyst estimate. Exxon Mobil Corporation raised its dividend for the 44th consecutive year and pledged to maintain US$20 billion in annual buybacks. Chief Financial Officer Neil Hansen said the profit surge was less a windfall than a reward for increasing output when it was most needed. Since 2019, Exxon Mobil Corporation has raised Gulf Coast distillate production by 40%, helped by heavy investment since 2020, when competitors were selling refineries or converting them into biofuel plants. "As a company, the most meaningful response we can make to higher global commodity prices is to use every available means to increase supply," Hansen said in an interview. Exxon Mobil Corporation is "putting more diesel into the market in today's very tight environment." Chevron Corporation also posted the fourth-highest quarterly profit in its history. Third-quarter net earnings per share were US$5.28, 35 cents above the average analyst estimate. The company maintained US$2.5 billion in share buybacks for the quarter, at the low end of its full-year guidance range. For the second consecutive quarter, Chevron Corporation executives used windfall profits mainly to pay down debt. "We don't react to ups or downs, and we don't adjust our positioning. For now, we are sticking to our long-term financial priorities and making no changes," Chief Financial Officer Eimear Banner Corporation said in an interview. Biraj Borkhataria of Royal Bank of Canada Capital Markets said in a report that Chevron Corporation's decision not to raise its annual buyback range "perhaps reflects the external perception of large buybacks rather than increased investment during an energy crisis." Thanks to last year's acquisition of Hess Corporation, Chevron Corporation's production rose year on year, allowing it to capitalize on the roughly 34% year-on-year rise in international crude prices. The Hess deal gave Chevron Corporation a 30% interest in Guyana's prolific Stabroek block, which is operated by Exxon Mobil Corporation. Chevron Corporation is on track to produce 300,000 barrels per day from Venezuela by year-end, up 20% from a year earlier. Its costs in Venezuela are below US$20 a barrel, making it one of the most profitable oil-producing regions in the world. Banner Corporation said Venezuela "is immediately accretive to earnings and free cash flow positive, and we are not worried about our ability to increase production."