Oil companies must confront Trump over gasoline prices after high profits

U.S. oil companies are expected to report their biggest quarterly profits in years, which could set up a clash with President Donald Trump, who has been pressuring his longtime ally, Big Oil, to cut gasoline prices ahead of November's midterm elections.

After months of complaints from Americans about rising gasoline prices, Exxon Mobil and Chevron are expected to release their second-quarter results in the coming weeks, which will be more than three times higher than the first quarter.

Oil prices soared after the start of the US-Israeli war against Iran in late February and the tightening of global fuel supplies.

Oil company profits are expected to reach their highest levels since 2022. The expected bonanza could complicate the normally cordial relationship between Trump and the oil industry, a major financier of Trump and the Republican Party.

Rising gasoline prices amplified calls for more affordable prices from Democrats hoping to regain control of the U.S. Congress, and also drove down Trump's approval rating as few Americans believed the war with Iran was worth the costs.

The government has asked the US Department of Justice to investigate possible speculation in gasoline prices.

Treasury Secretary Scott Bessent warned producers and refiners that the White House may consider administrative measures if gas station prices do not fall sharply.

"The industry is definitely talking amongst itself and thinking about ways to deal with this, but we know what's coming. We understand the politics involved," said an industry executive, speaking anonymously.

Since shipping through the Strait of Hormuz resumed last month, Trump has said he wants the national average price of gasoline to drop to about $2.50 per gallon - well below the current average of about $3.85 and about 11 percent below his presidency low of about $2.81 reached in late December.

According to interviews with eight lobbyists and sector representatives, oil industry lobbyists have intensified efforts to reach out to authorities and legislators to mitigate criticism.

Oil industry executives say they have limited influence over retail gasoline prices. Crude oil prices represent nearly half the price consumers pay at the pump, with the rest determined by refining, distribution, marketing and taxes.

Still, benchmark crude oil prices have returned to pre-war levels, but U.S. gasoline prices remain about 22% higher than before the war.

Analysts and industry groups cite physical fuel shortages and limited gasoline supplies as driving factors, not just crude oil prices.

Bob McNally, president of Rapidan Energy Group, said the divergence highlights structural pressures between supply and demand.

"Gas prices do not keep up with the price of crude oil, especially during a major global crisis that affects supply, refining and inventories," said Bethany Williams, spokeswoman for the American Petroleum Institute.

The American Fuel and Petrochemical Manufacturers Association said lawmakers also play a role, citing regulatory costs.

"Refineries do not set the price of finished gasoline, and crude oil is just one of many inputs," the group said. For example, the Renewable Fuel Standard requires retailers to sell a certain percentage of fuel containing ethanol or other biofuels.

The White House has said Trump's top priority is lowering gasoline prices, citing falling oil prices since the Iran deal and increased coordination with the oil industry regarding licensing and regulations.

Exxon declined to comment. Chevron referred to an interview with CNBC on June 25, in which Chief Financial Officer Eimear Bonner said it would take time for gasoline prices to normalize.

Exceptional profits
Analysts expect oil majors' second-quarter profits to be the strongest since 2022, when Russia's invasion of Ukraine rattled energy markets.

According to estimates compiled by LSEG, Exxon Mobil is expected to report adjusted net income of about $15.9 billion, more than triple first-quarter profits.

The forecast for Chevron is around US$9.9 billion, also more than triple the previous quarter.

Part of the increase will likely reflect a reversal of first-quarter accounting losses related to derivatives used to hedge exposure to crude oil and refined products. But analysts say the broader gains stem from stronger market fundamentals.

Energy consulting firm TPH estimates that the U.S. gasoline refining spread - the difference between the price of crude oil and the price of fuels produced from it - averaged about $25 per barrel in the second quarter, an increase of about $16 from the previous quarter.

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The company also reported that the diesel refining spread rose by around US$15, reaching approximately US$45 per barrel, the highest margins since mid-2022.

Strong demand for American exports amplified gains as the war left overseas refineries short of supplies.

Despite rising fuel prices for American drivers, analysts at BMO Capital Markets expect oil companies to accelerate share buybacks in the second half of 2026, maintaining a post-pandemic focus on returns over production growth.

"Being the boogeyman is no fun," said one executive. "But we need to make authorities aware that this is a cyclical sector and that no one cares when the market turns and we take on all the risk."

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Source: CNN