Merchants,
Refiners are having the summer of their lives while the man in the White House keeps telling voters that cheap gas is the entire point of his presidency.
Those two facts don’t sit well together and they’re about to sit a lot worse.
Trump has leaned on two things to hold pump prices down. Drain the strategic reserve and pump and export record amounts of oil. Both hit a wall at the same moment this autumn! the thing waiting on the other side of that wall is a midterm election.
The Reserve Keeps Falling At A Record Pace
The strategic reserve is down to about 307 million barrels, the lowest since 1983 and it’s still falling, at the fastest pace on record.
Since the Iran war kicked off in late February, Washington has pulled roughly 172 million barrels out of it to shave the top off every price spike, running at 3-5 million a week.
It isn’t empty, but keep draining at this clip and you reach the practical floor, somewhere near 300 million, where the Energy Secretary starts needing Congress to go any lower.
On this math US get there around November….Around the vote.
And there’s no bigger number left to fire.
That’s the part people keep missing, every crisis this decade needed a larger release than the one before and the tank is running low.
Whatever Trump does about high gasoline from here, it won’t be another big SPR draw.
The Barrels Are Leaving &The High Prices Are Staying
Meanwhile the US is pumping near a record, about 13.7 million barrels a day, and shipping a staggering share of it abroad. In April, total oil exports, crude plus products, hit 13.6 million barrels a day (Most ever).
Crude on its own touched 5.6 for a stretch this year America was the single biggest oil exporter on earth, quietly plugging the hole Hormuz tore in world supply.
Look at that line for a second, because it matters later. A decade ago it was illegal to export American crude at all. A 1970s ban, born of the last oil shock panic, kept every barrel home.
Congress killed it in 2015, and exports went vertical.
That history is the whole reason an export cap is even a conversation again.
Great for the trade numbers, awkward for the pump because while those barrels sail off to Rotterdam and Yokohama, gasoline at home still runs north of $4 a gallon and diesel is over $5, and the refiners standing in the middle are the ones cleaning up.
That gap, cheap ish crude leaving, expensive fuel staying, is the political tinder in this whole story.
Now look at who’s leaning on those American barrels.
When the Gulf seized up, the world plugged straight into the United States. Japan went from near zero to about 1/3 of its crude coming from American ports in a matter of months.
Korea, the Netherlands, Singapore, all buying more.
Mexico runs its cars on US gasoline. That cable the world just plugged in is, from Washington’s side of the table, a hostage…. It’s leverage. It’s also a temptation, because every one of those barrels is a barrel not calming a Trump’s voter in Ohio for the midterm.
The Blowout Quarter He Called “Price Gouging”
And now the piece of hard data that ties the whole thing together, because it landed just last week. Big oil and the refiners printed the best quarter in years, and the president reportedly hit the roof, calling it price gouging (refers to the practice of raising prices on essential goods to unfair or exorbitant levels, especially during emergencies).
The scoreboard is something, Exxon booked $14.5 billion of net income, more than double a year ago.
Chevron did $12.1 billion, up 384%, with output up 1/5.
Shell put up $9.8 billion adjusted and ran its refineries at a record 102% utilization.
And the one Trump is really watching, Valero, a pure refiner with no oilfields to hide behind, posted a record $3.72 billion, up around 400%!!!
It isn’t gouging, though, and this is the part that matters. They printed because of the war, not in spite of the pump.
Something like five million barrels a day of the world’s refining is offline, a big slice of it Russian plants that Ukrainian drones keep setting alight. Fuel is scarce, so the cracks went vertical and diesel margins hit records.
And notice which barrel is doing the damage here.
Not crude…. Refined product, the gasoline and diesel a voter actually buys, is where the money and the pain both live, and it’s the hardest thing for any president to control.
The sharpest refiners leaned straight into that. Valero pivoted hard into discounted Venezuelan heavy, 15-20 dollars under Brent and told the market it’ll run more of the stuff than it ever has.
Look at where that Valero money came from. Refining operating income of $4.5 billion, up 246%, at a margin over $23 a barrel, roughly double last year.
That single bar is the president’s whole problem in one picture.
The thing making these refiners rich, buy the cheap heavy barrel, sell the scarce fuel at the global price, is exactly what he’d have to break to get the pump down.
Hold that thought, because it’s what makes the lever he’s reaching for so much harder to pull than it looks.
The Math Doesn’t Work For Him
So here’s the squeeze, with Trump’s name on it.
Pump prices high.
Refiners rich.
Reserve nearly empty.
A war his own comments suggest could grind on for months.
His favorite tool, the SPR, is almost spent, and his other one, drill and export, is precisely what’s carrying the barrels away from American drivers.
What does a president who keeps gasoline as a personal scoreboard do when the easy buttons stop working and the calendar reads few months? He’s got one lever left that he hasn’t pulled and it points at fuel, not crude.
It’s the loud one, and half the world is already pulling it….
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