Uff-Da -- We’re Seeing Some Big Forecasts Here -- July 21, 2022

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U.S. fuel makers are poised to generate historic levels of cash from refining oil into gasoline and other products after fuel prices have surged nationwide.

Valero Energy Corp.,  Marathon Petroleum Corp. and Phillips 66, the largest three independent refiners, are set to collectively bring in about $14 billion in cash from operations this quarter, analysts estimate, the highest combined level on record.

The huge cash flows from their core business will translate into gargantuan profits as the companies report their results beginning next week. Investment bank Tudor Pickering Holt & Co. expects the largest eight independent refiners will report a 652% jump in earnings per share, on average, compared with the first quarter of the year, allowing some of these companies to log their highest returns in years.

Exxon Mobil Corp. this month said its fuel-making profits could climb up to about $4.4 billion in the second quarter, compared with an average of $853 million in the same periods from 2017 to 2019. That was the largest single factor in the company’s forecast that earnings could be as high as about $18 billion, which would be its most lucrative quarter in at least 25 years.

“We’re seeing margins twice as high as the golden age,” said Charles Kemp, a vice president at energy consulting firm Baker & O’Brien Inc., referring to a period of record profit levels for refiners from 2004 to 2007. 

Refiners back then benefited from a supply gap that emerged in part because they had virtually stopped building refineries since the last significant, new U.S. refinery was constructed in the 1970s.