Major oil companies are expected to report significant profits for the spring and summer quarters, as the ongoing conflict between the U.S. and Iran has disrupted global petroleum shipments and increased fuel costs for consumers worldwide. Analysts anticipate that these elevated prices will translate into substantial earnings for publicly traded energy giants like Exxon Mobil and Chevron, which are set to announce their second-quarter results soon.
The conflict, now in its sixth month, has significantly curtailed shipping through the Strait of Hormuz, a critical waterway that previously handled a fifth of the world's oil and natural gas supply. This constraint on global supply has caused prices for Brent crude, the international benchmark, to surge from around $70 to over $100 a barrel for much of March, April, and May, reaching a peak of $126 at one point.
These higher prices at the pump, at the gas station, and for jet fuel have increased costs for consumers and led to shortages in some regions, including sporadic fuel rationing in Australia and temporary government office closures in Nepal and Sri Lanka. Six of Europe's largest oil companies collectively reported first-quarter profits of $22 billion, a 43% increase compared to the same period last year, according to Global Witness.
"There are constituencies around the world who are having a very good crisis, and the oil producers are one of them," said Patrick Galey, fossil fuels lead at Global Witness. He contrasted this with the struggles of hundreds of millions globally facing blackouts, electricity curbs, rationing, and food queues, questioning the justification for the price paid by the rest of the world.
While energy companies like Exxon and Chevron do not directly set the price of American oil, which fluctuated between $68 and $115 a barrel during the second quarter, their profits are influenced by market dynamics. The price is driven by supply and demand, and the willingness of traders, refiners, and other buyers to pay.
In response to these market conditions, Democrats in Congress have introduced legislation aimed at taxing major oil producers on profits earned from 2026 onward, with the aim of redistributing the tax revenue to consumers. Senator Sheldon Whitehouse, a Rhode Island Democrat, and Representative Ro Khanna, a California Democrat, have proposed amending the U.S. tax code to impose a per-barrel excise tax on companies producing or importing at least 300,000 barrels of oil daily in 2025. This tax would amount to 50% of the difference between the oil price at the time of the levy and the average price from the previous year. Similar proposals have failed to gain passage in prior years.
"We cracked $4 again per gallon last weekend in gas stations that I drove by, and that’s a big expense, particularly for families that get their income from driving around from job to job in the work van or the work truck," Whitehouse stated. The average price for a gallon of regular gasoline has risen to $4.10, approximately $1 higher than the previous year, before the U.S. and Israel launched attacks on Iran.
Companies that possess both oil extraction operations and refineries, such as Exxon and Chevron, are particularly well-positioned to benefit from the current market conditions, according to Tom Seng, assistant professor of energy finance at Texas Christian University. Refineries are experiencing historically high "crack spreads," which represent the profit margins on turning crude oil into refined products like gasoline and jet fuel. Seng noted that in late July, refineries planning to purchase a barrel of oil for around $80 were projecting profits of $50-$60, a significant increase from the typical $20-$25 range.
Timothy Fitzgerald, a professor of business economics at the University of Tennessee specializing in the petroleum industry, explained that while not all refineries globally have secured sufficient crude oil supplies, those in the U.S. with ample access are achieving high profits, especially from jet fuel and diesel. He added that the impact ultimately falls on consumers, but also affects the embedded energy costs in nearly all purchased goods.
Fitzgerald further elaborated that while U.S.-based oil producers and international companies like Exxon and Chevron are benefiting from higher prices, companies in the Middle East facing disruptions in getting their liquefied natural gas to market or dealing with damaged facilities are experiencing reduced revenues and increased operational costs.
Exxon and Chevron's profitability in the first quarter was affected by how oil is traded, with their first opportunity to capitalize on higher prices occurring in April. Companies that had oil stored on floating tankers and available for spot-market trading, including some European firms, were able to benefit from higher prices earlier in March, according to Seng.