US refiners are earning extraordinary margins as Americans face sharply higher gasoline and diesel prices, leaving the Trump administration with few conventional options to ease fuel costs without creating new supply disruptions, Kpler analyst Michelle Brouhard said in a note Friday.
The national average for regular gasoline is $4.30 per gallon, up 34% from $3.19/gal a year ago, while diesel is about $6.06/gal, up almost 63%, according to AAA.
Trump met with refinery executives last week after criticizing major oil companies for making what he called excessive profits.
The six largest US energy companies with refining operations earned $24.7 billion from refining in the second quarter, nearly five times the year-earlier level, Brouhard said, citing the Wall Street Journal.
Kpler estimates US refinery margins could average about $42 per barrel in Q3, versus roughly $14 a year earlier.
Refineries are already running near their limits, with utilization approaching 98%. Yet US transport-fuel demand is falling, with Kpler estimating consumption declined by about 230,000 barrels per day year over year in both the second and third quarters.
The administration has already used traditional tools, including a 172 million-barrel Strategic Petroleum Reserve release, Jones Act waivers, fuel-specification waivers, and measures to expand domestic production, refining, and logistics capacity. Those steps offer limited immediate relief.
That leaves two potential near-term strategies, increasing global product supplies through diplomacy or restricting US fuel exports.
Washington could encourage China to increase refinery runs and exports or seek an easing of Ukrainian attacks on Russian refineries. More global supply could reduce demand for US products, although additional Chinese production would also increase crude demand.
Export controls would keep more US gasoline, diesel and jet fuel at home and could lower Gulf Coast prices. However, regional effects would vary, with the Gulf Coast producing a large surplus while the East and West coasts remain dependent on outside supplies.
Restricting exports could also prompt refiners to cut production if margins collapse, ultimately reducing domestic supply and straining US allies and trading partners that rely on American refined products.
With refiners operating near capacity, policymakers face a choice between restoring global supply through diplomacy and directly limiting US product exports.
Sustainable price relief ultimately depends on restoring refining capacity and fuel flows disrupted by conflicts in Iran and Ukraine.