Profit margins surge to a six-year high—refineries are celebrating, but why don’t consumers feel the drop in fuel prices?

November 15, 2025, 12:30 PM UTC These days have indeed been smooth sailing for refineries—but far less pleasant for ordinary drivers pulling up at gas stations. Across Europe, the United States, and Asia, major refineries continue earning profits the old-fashioned way: processing crude oil into core fuels like gasoline and diesel, then selling them at profitable margins. Yet there’s a crucial difference now: global supply threats have reached unprecedented scale. Ongoing attacks on Russian energy infrastructure, temporary shutdowns at key facilities across Asia and Africa, and permanent closures of refineries across the U.S. and Europe have collectively removed millions of barrels per day of diesel and gasoline from the global market. Beyond these immediate disruptions, traders are also bracing for upcoming uncertainties. The U.S. is set to impose sanctions on Lukoil PJSC and Rosneft PJSC; the EU will introduce new restrictions on fuels refined from Russian crude. These measures further strain an already tight supply chain. Ironically, while global crude oil prices are falling, retail fuel prices remain stubbornly high—a reality that sits uncomfortably with the U.S. government, which places high priority on "energy affordability." Eugene Lindell, Head of Refining Products at consulting firm FGE NexantECA, notes that current refinery profit margins globally are extraordinarily high. Regardless of location, the message to the entire refining industry is clear: ramp up production. Bloomberg’s fair-value data shows that refinery margins in the U.S., Europe, and Asia have hit their highest levels since at least 2018. This stellar profitability has sent refiner stocks soaring: Valero Energy Corporation, Türkiye Petrol Rafinerileri A.Ş. (Tüpraş), and Poland’s PKN Orlen have all posted sharp gains—with Orlen’s share price up over 100% year-to-date. Although markets worry about crude oversupply pushing down oil prices, widespread disruptions across the global refining system have constrained the total volume of crude that can be converted into gasoline, diesel, and jet fuel. That’s great news for operating refineries—but consumers see none of the benefit from plunging crude prices. Attacks on Russian refineries continue unabated. Just this month, Ukrainian forces reportedly struck facilities in Saratov, Orsk, and Volgograd—directly impacting Russia’s fuel output. Last month, Russian petroleum product exports were already nearing multi-year lows—and that was *before* drone strikes damaged critical loading infrastructure in the Black Sea port city of Tuapse. Production interruptions elsewhere have further intensified supply tightness. In Kuwait, the massive Al-Zour refinery—designed for 615,000 barrels per day—currently operates only one of its three crude distillation units. In Nigeria, the Dangote refinery recently restarted a key gasoline production unit—only to announce it will shut down for approximately 50 days of maintenance in the coming weeks.

Profits surge twelvefold! A major private-sector giant releases its earnings preview.

Dongfang Shenghong reported a net profit attributable to shareholders of RMB 1.432 billion in Q1 2025, up 319.86% year-on-year; its Q2 profit forecast ranges between RMB 2.768 billion and RMB 3.568 billion—roughly double Q1’s result. This pace closely tracks the upward trajectory of oil prices. Moreover, numerically speaking, Dongfang Shenghong’s first-half net profit has already approached—or even exceeded—the industry’s prior full-year forecasts for the company. This isn’t a case of flawed industry forecasting; rather, it reflects structural shifts beyond the scope of institutional expectations. 02 What’s behind the explosive growth? Integrated advantages, a high-oil-price environment, and inventory-related gains underpin Dongfang Shenghong’s strong profitability—but they’re not the whole story. A more subtle, underlying chain of events is also at work. A long-simmering yet underappreciated reality is capacity rationalization. Europe felt the pressure first. According to data from the European Petrochemical Association, roughly 30 refineries have been progressively shuttered across Europe since 2009. Over just ten years, European refining capacity contracted by 37%. Concurrently, the EU’s carbon price has surged past €90 per tonne. For energy-intensive sectors like refining and petrochemicals, this is no longer merely a policy signal—it’s a tangible, operational cost. Currently, 60% of European refineries are in a high-risk shutdown state—accounting for 45% of all high-risk refineries globally. In ethylene production alone, WEGO Research Institute data shows Europe has retired approximately 11 million tonnes of capacity in recent years. North America is undergoing similar capacity contraction. Valero Energy, the largest independent U.S. refiner, has opted to absorb an $1.1 billion accounting loss to permanently close its California refinery by April 2026—a facility producing 170,000 barrels per day, representing 8.6% of California’s gasoline output. Phillips 66’s Los Angeles refinery will cease operations in December 2025. Together, these two plants account for roughly 17% of California’s refining capacity. Over the past five years, overall U.S. refining capacity has declined by about 500,000 barrels per day. This capacity withdrawal isn’t driven by sharply falling demand, but rather by rising regulatory compliance costs and voluntary exits prompted by aging assets. Wood Mackenzie’s 2025 report offers a more systematic outlook: by 2035, approximately 21% of global refining capacity—101 refineries totaling 18.4 million barrels per day—faces closure or restructuring risk. The majority are high-cost, aging, high-carbon-emission facilities concentrated in Europe and North America. Where is new capacity emerging? In Asia-Pacific—especially China. Over the past decade, China’s refining and petrochemical expansion has constituted the world’s single largest source of incremental capacity. By end-2025, China’s crude processing capacity reached 930 million tonnes per year—surpassing the U.S. to become the world’s largest since 2022. Domestically, China now hosts over 30 refineries each with capacity exceeding 10 million tonnes annually; collectively, these mega-refineries account for 62% of the nation’s total refining capacity. As high-cost capacity exits Europe and North America—and new Asian capacity gradually comes online—the global pricing center for refined products, fuels, and chemical feedstocks is shifting. For the past two decades, the refining and petrochemical industry operated within a relatively unified global market system.

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