TotalEnergies CEO Patrick Pouyanné has highlighted a significant split in the energy market, noting that while Brent crude is trading above $100 a barrel, the product market, which directly impacts consumers, is experiencing much higher prices. He specifically stated that the world has "never experienced" refining margins for products like Asian jet fuel at their current levels. This divergence is attributed to disruptions stemming from the war with Iran, which has caused approximately 15% of TotalEnergies' production to be offline, although surging product prices have more than offset the lost crude barrels.
The war in Iran and resulting export restrictions, particularly affecting the Strait of Hormuz, are transforming an initial oil supply shock into a broader fuel supply crisis. This has led to a record-high diesel crack spread of $102 a barrel, nearly triple its pre-war levels. Jeffrey Currie, former head of commodities at Goldman Sachs, emphasized that nobody consumes crude oil directly; what matters are product prices. He noted that historically stable spreads between product and crude prices have diverged dramatically, with crude sometimes being nearly half the price of products. For instance, European diesel was about $170 a barrel when Brent crude traded at $87 a barrel, and the spread crossed $90 a barrel for the first time since the war began.
Major oil companies, including Shell, TotalEnergies, ExxonMobil, and Chevron, have reported their strongest quarterly earnings in years for the second quarter of 2026, benefiting significantly from these record refining margins and high product prices. TotalEnergies' adjusted net income jumped 68% year-over-year to $6 billion, with its European Refining Margin Marker nearly tripling from $4.3 a barrel in the first half of 2025 to $12.4 a barrel. Chevron achieved record refinery throughput of over 1 million barrels per day. Executives anticipate that strong refining profits will persist in the coming quarters due to low global fuel inventories, ongoing supply disruptions, and seasonal demand.
If the conflict continues, Pouyanné expects prices to rise further, especially as Asian demand increases over the summer and Europe seeks to replenish its natural gas storage. European natural gas, trading around $18 per million British thermal units (MMBtu) recently, could hit $40/MMBtu if the war extends. Despite the elevated prices for refined products, such as the U.S. national average for regular gas at $4.07 a gallon (up 30% since the war began) and retail diesel at $5.5477 a gallon, covert Middle Eastern oil shipments have helped to stabilize global crude prices and prevent a more severe inflation spike.
