According to Bloomberg, the war in the Middle East and Russia’s full-scale invasion of Ukraine have increased the profitability of oil refining worldwide. The temporary shutdown of part of the production capacity means that plants that continue to produce fuel are earning substantially higher margins.
Oil refining hits records
The temporary shutdown of parts of the world’s fuel production infrastructure has reduced supply, pushing the margins of operating plants to record levels. Companies that continue to produce diesel, petrol and other petroleum products are generating far higher profits.
In the third quarter Shell’s refining margin reached $42 per barrel compared with $24 in the previous three months. The company’s adjusted net income for July–September was $10.8 billion, its strongest quarterly result since spring 2022.
Companies are using revenues to pay shareholders
The largest energy corporations are directing the additional income mainly to shareholder compensation rather than business expansion. One of the main tools has been share buybacks; Shell announced one of the largest repurchase programmes in its history.
The results also demonstrate the benefits of a business model that combines extraction, refining, transportation and trading during periods of market turmoil. Although Shell has reduced the number of its own refineries (NPZ), those that remain are increasingly tightly integrated into global operations.
