Gas prices in the U.S. could reach a Labor Day record if tensions in the Strait of Hormuz persist, with current prices around $4.06 per gallon, significantly higher than earlier this year. The ongoing wars in Europe and the Middle East have led to a loss of refining capacity, with about 5 million barrels per day offline, according to Valero's COO Gary Simmons.
This tight refining market is causing a disconnect between crude oil prices, which have fallen to around $76 per barrel, and gasoline prices, which remain high due to strong demand and limited supply. ExxonMobil's CEO Darren Woods noted that the current pricing dynamics are driven more by refining demand than crude oil costs.
Refiners are capitalizing on this situation, with companies like Valero, Marathon Petroleum, and Phillips 66 reporting substantial profit increases, driven by high crack spreads. The Gulf Coast refiners are particularly well-positioned, benefiting from relaxed shipping regulations and access to Venezuelan crude.
However, further disruptions in the Middle East or continued impacts from the Ukraine conflict could exacerbate supply constraints, prolonging high gas prices for consumers