When gas prices climb, Washington reaches for its favorite villain. Price gouging. Corporate greed. Big Oil profiteering. It is a script so well-worn that both parties can recite it in their sleep, and it has the singular advantage of requiring no understanding of how energy markets actually work.
On July 31, ExxonMobil chairman and CEO Darren Woods went on CNBC’s Squawk Box and, in about fifteen minutes, dismantled the whole act with a single observation that any American paying four dollars a gallon deserves to hear.
“There’s a disconnect today because now we have a refinery constraint,” Woods said. “Pump prices are being established by the supply and demand of refined petroleum products, not crude.”
Read that again, because it explains what has baffled drivers for months. Crude oil peaked above $126 a barrel in the spring after Iran’s war closed the Strait of Hormuz. It has since retreated to the $85 to $90 range, sliding further this week on renewed talk of a deal that could reopen the strait. Yet regular gasoline still averages above $4 a gallon nationally, and diesel sits north of $5.30, according to federal Energy Information Administration data. The old rule that pump prices follow crude has broken, and Woods explained precisely why.
The Bottleneck Nobody in Washington Wants to Discuss
For most of modern history, the world had more refining capacity than it needed. Crude was the binding cost, so when crude fell, gasoline fell with it. That cushion is gone. The war and the Hormuz closure did not merely choke off crude shipments.
They simultaneously knocked out Middle Eastern refined-product exports and starved Asian refineries of the Gulf crude they depend on, erasing nearly 9 percent of global refining capacity in one stroke. Refineries that still have crude to run, particularly American ones, are earning crack spreads of $50 to $60 a barrel against a historical norm in the twenties.
That is not greed. That is arithmetic. When the world loses a tenth of its ability to turn oil into fuel, the price of fuel detaches from the price of oil, and no congressional hearing or Federal Trade Commission investigation can legislate the physics back into place.
Asked when drivers might see relief, Woods did not sugarcoat it. “I wouldn’t hold my breath here in the short term,” he said, adding that prices will likely stay near current levels until the strait reopens and product flows are reestablished, or until China pushes additional refined exports into the global market. Even a ceasefire will not flip a switch. Shippers burned by six months of tanker attacks will not race back into the Persian Gulf the day a deal is signed.
A Company That Prepared While Others Postured
Here is the part that should sting the anti-fossil-fuel crowd. The same day Woods gave that interview, ExxonMobil reported second-quarter earnings of $14.5 billion and free cash flow of $17.2 billion, despite temporarily losing roughly 10 percent of its upstream production to the Middle East conflict.
Excluding that disruption, the company posted its highest production in more than two decades, driven by record Permian output and Guyana. Its Gulf Coast refineries delivered record second-quarter diesel production while global supply tightened. The company returned $9.4 billion to shareholders and, in a fitting bit of symbolism, completed its move from New Jersey to Texas on July 1.
“The second quarter was shaped by disruption, but defined by execution,” Woods said in the earnings release. Translation for policymakers who spent a decade demonizing domestic energy investment while blocking pipelines and refinery expansions… the companies that kept drilling, kept refining, and kept investing are now the reason American fuel supply has held together at all. The United States has not built a major new refinery since the Carter administration. Every politician who cheered that stagnation owns a piece of today’s pump price.
The men of Issachar were commended in Scripture as those “that had understanding of the times, to know what Israel ought to do” (1 Chronicles 12:32).
Understanding the times is precisely what our energy debate lacks. The times demand refining capacity, secure shipping lanes, and leaders who grasp that affordable fuel is the foundation of a working family’s budget, not a bargaining chip in a climate crusade.
Woods handed the country an honest diagnosis. Whether Washington has the humility to accept an explanation that does not involve a villain is another question entirely. History suggests the subpoenas will arrive before the understanding does.
