Fuel prices are likely to remain elevated in the coming months even if crude oil costs decline, according to warnings from ExxonMobil Holdings Corp. and Chevron Corp.. The ongoing conflicts in Russia and the Middle East have left global refining capacity critically short, severing the traditional link between crude oil and finished fuel prices.

Gasoline, diesel, and jet fuel prices have historically moved in tandem with crude oil. That relationship is weakening, however, because a substantial number of refineries are offline. As a result, fuel prices remain stubbornly high and continue to accelerate inflation even as oil prices fall. The refining shortage is particularly difficult to resolve because new refineries typically require multi-billion-dollar investments and take the better part of a decade to permit and build, meaning any capacity lost to conflict or disruption cannot be quickly replaced.

"The constraint pain point in the energy system is refining," ExxonMobil Chief Financial Officer Neil Hansen said in an interview, describing it as "something that perhaps the market isn't fully focused on."

Nearly 10% of the world's crude oil refining capacity is effectively out of commission due to the largely closed Strait of Hormuz, continued Ukrainian strikes on Russian refineries, and China's export ban, according to Melius Research. The refineries still operating are running at maximum capacity to meet demand, leaving them unable to produce additional fuel even when crude oil is available for processing. This has resulted in record-high refining margins that benefit refinery owners while driving up consumer costs.

The trend is visible in the United States, where the average gasoline price has climbed above $4 per gallon, frustrating both drivers and politicians. President Donald Trump has criticized major oil companies in recent weeks for not reducing costs quickly enough. Retail gasoline prices are only 10% below their peak in May, even as West Texas Intermediate crude has dropped 26% from its 2026 high.

"Refining is obviously the bottleneck in the petroleum system right now, and margins are exceptionally high," said Neil Mehta, an analyst at Goldman Sachs Group Inc.

Chevron CEO Mike Wirth identified middle distillates — including diesel, jet fuel, and heating oil — as the most acute pain point. Retail diesel prices are just 6% below their highs this year, despite the decline in WTI being roughly four times larger. Wirth said the market is expected to tighten further as countries in the northern hemisphere rebuild heating oil inventories ahead of winter. Elevated diesel costs carry particular weight for the broader economy because diesel powers freight trucking, agriculture, and industrial logistics, meaning sustained high prices tend to cascade into shipping costs and consumer goods inflation.

"I think we're going to see some upward pressure on product pricing here into the third quarter and perhaps beyond that," Wirth said.

Gasoline prices are beginning to decouple from crude oil prices, trading more closely with storage levels and inventory data, according to Rob Thummel, senior portfolio manager at Tortoise Capital Advisors LLC.

Refined product inventories "are approaching historical lows," Thummel said. "The gasoline price is not as much being represented by the movement in oil prices but more so the movement in inventories."

ExxonMobil, which operates the largest refinery network in the world outside of China, expects the current trend to persist for the foreseeable future. Approximately 5 million barrels per day of refining capacity is currently unable to reach the global market.

"I've never seen the available capacity relative to demand as low as it is today," ExxonMobil CEO Darren Woods said on a call with analysts. "It's going to take a while for the industry to climb its way out of that hole."

Oil industry participants have raised alarms about systemic risks to the energy supply throughout the year. Some analysts previously suggested oil could reach $200 per barrel if the Strait of Hormuz remained shut for a prolonged period. That threshold was never approached, even amid the extended conflict.

This time, however, the dynamics may differ. ExxonMobil's Gulf Coast refineries operated at a 95% utilization rate in the second quarter, while Chevron's US facilities ran at 97%, leaving virtually no margin for disruption. Shell Plc operated its refineries at 102% during the same period but expects utilization to decline in the current quarter due to scheduled maintenance.

"The geopolitical uncertainty has tightened markets and is reinforcing the importance of reliable supply," Chevron CFO Eimear Bonner said in an interview. "The shock absorbers that have mitigated the volatility up until now, those continue to be drawn down."