U.S. refiners are converting wartime fuel shortages into some of their strongest profits in years, and shareholders are receiving a large share of the cash.
Marathon Petroleum, Phillips 66, and Valero Energy generated a combined $12.6 billion in second-quarter profit as disruptions through the Strait of Hormuz and attacks on Russian refineries tightened global fuel supplies.
What Moved
Tuesday, August 18
Marathon, Phillips 66, and Valero earned a combined $12.6 billion in second-quarter profit.
That was their highest combined quarterly profit since Russia invaded Ukraine in 2022.
The three refiners returned $6.3 billion through dividends and stock repurchases.
A year earlier, they returned $2.6 billion while earning $2.9 billion in profit.
Phillips 66 increased its authorized share repurchase program by $10 billion in July.
Valero authorized a new $5 billion buyback program.
HF Sinclair raised its quarterly dividend by 5%.
Marathon shares were up about 110% year-to-date.
Valero was up more than 98%.
Phillips 66 had gained about 75%.
The S&P 500 energy sector was up 36% over the same period.
Why It Moved
Refining margins surged as global fuel supplies tightened.
The war with Iran disrupted shipping through the Strait of Hormuz, while attacks on Russian refineries removed additional product supply. International buyers became willing to pay more to secure gasoline, diesel, and other refined fuels.
That pushed crack spreads, a common measure of how profitable it is to turn crude oil into finished fuel, to record levels.
The ultra-low sulfur diesel futures crack spread reached a record $93.84 per barrel on August 10. The U.S. gasoline futures crack spread reached $60 per barrel on July 17, its highest level since April 2020.
Those margins created a large cash windfall for refiners. Instead of directing all of it toward new capacity, companies are returning substantial amounts to shareholders.
TD Cowen expects Marathon and Valero each to repurchase stock equal to roughly 20 percent of their current market value between the third quarter and the end of 2027.
Phillips 66 is expected to buy back roughly 10 percent of its market value while putting more cash toward growth projects and debt reduction.
Why It Matters Now
Several short-term signals emerged:
U.S. refiners remain major financial beneficiaries of tight global fuel supply.
Record refining margins are translating directly into larger shareholder returns.
Buybacks could keep supporting refiner stocks even after their sharp 2026 gains.
Diesel remains especially tight.
Fuel shortages are keeping consumer inflation pressure elevated.
Third-quarter margins are still strong, but have eased from second-quarter peaks.
The stock performance shows how aggressively investors have already priced the shift. Marathon and Valero have roughly doubled this year, substantially outperforming the broader energy sector.
That makes the next phase more dependent on whether margins remain elevated.
Executives are still cautiously optimistic. Marathon said product margins remain strong but have eased from the exceptional levels seen during the second quarter and early third quarter.
Valero also noted that jet fuel margins have weakened so far this quarter. Still, the company expects those margins to improve as export opportunities to Europe reopen and refiners transition toward winter diesel production.
Consumer prices remain the other side of the trade. U.S. gasoline rose above $4 per gallon on average at the end of March for the first time in more than three years. Higher refining margins help producers and shareholders, but they also show how tight fuel markets are feeding through to household costs.
In the immediate window ahead, markets will watch diesel and gasoline crack spreads, Strait of Hormuz shipping conditions, Russian refinery disruptions, and the pace of shareholder returns. If fuel supplies remain constrained, U.S. refiners could continue generating unusually strong cash flow even as seasonal demand begins to soften.
