U.S. refineries are currently operating at a robust 96.1% of capacity, having processed their largest amount of crude in the second quarter since 2019. Despite this high utilization, gasoline inventories have fallen to their lowest levels since 2012, standing at 210 million barrels, just 20 million barrels above critical levels, according to industry experts like Andy Lipow. This suggests that even with increased output, the supply is struggling to meet demand, leading to concerns about potential shortages.
The profitability of U.S. refiners, measured by crack spreads, has reached record highs. The 3-2-1 crack spread, a key benchmark, closed at $69.66 per barrel, a record. Gasoline crack spreads are up 60% from a year ago, and diesel and jet fuel crack spreads have more than doubled their 2025 levels, with the diesel crack spread alone settling at over $91 per barrel, another record. This indicates that refiners are experiencing significant profit margins, particularly from fuels other than gasoline.
The current situation is largely driven by refiners prioritizing diesel and jet fuel production over gasoline. This is due to tight global demand for these fuels, exacerbated by the ongoing Iran war and international buyers clamoring for U.S. supplies. While this has pushed U.S. fuel exports to record highs and benefited refiners, it has contributed to the dramatic drop in domestic gasoline stockpiles. Analysts note that higher retail and wholesale gasoline prices, along with increased margins relative to other fuels, are necessary to incentivize refiners to shift back to "max-gasoline mode."
U.S. national average retail gasoline prices stood at $3.95 per gallon, an increase of nearly $0.80 from last year. Prices had surged to as high as $4.56 per gallon in May due to disruptions from the blockade of the Strait of Hormuz. Diesel stockpiles, while rising by 4.5 million barrels last week to over 102 million barrels, are still below the five-year seasonal average, reflecting a prolonged global shortage. The extreme summer heat also poses a challenge, as refineries require cooler temperatures to operate efficiently, adding another layer of complexity to the supply situation.
