Charge twice as much, make twice as much: oil company profits doubled. Here's the math.
When you charge twice as much, you make twice as much. Everything else is just noise.
Here's the headline from this week: Shell's profit doubled. The oil company made $10.8 billion in July, August and September, up from $5.4 billion in the same three months last year (The Guardian, Shell results via Stock Titan).
The explanation you'll hear is the war in the Middle East. And that's part of it. But skip the explanations for a minute and just look at the numbers. They tell their own story.
The math, side by side
| A year ago | Now | Change | |
|---|---|---|---|
| Crude oil (world price, July–Sept average) | $69.10 a barrel | $94.90 a barrel | up 37% |
| Regular gas (U.S. average, Oct. 29) | $3.04 a gallon | $4.23 a gallon | up 39% |
| Diesel (U.S. average, Oct. 29) | $3.68 a gallon | $6.33 a gallon | up 72% |
| Shell's refining margin (its measure of what refiners make on each barrel) | $11.60 | $42 | 3.6 times |
| Shell's refining and chemicals profit | $0.55 billion | $3.86 billion | 7 times |
| Shell's total profit (July–Sept) | $5.4 billion | $10.8 billion | 2 times |
Sources: oil price, The Guardian; gas and diesel, AAA, today vs. one year ago; refining margin a year ago, Oil & Gas Journal; refining margin now and profits, Shell's results via Stock Titan and Shell's unaudited results.
Diesel even set its highest price ever on September 22, 2026: $6.53 a gallon, the U.S. average (AAA).
Read that table slowly. The oil went up about a third. Diesel went up almost three-quarters. And the cut the refinery charges on top of the oil, on every barrel, more than tripled. They charge more than twice as much for that part, and they make twice as much.
Think of a lemonade stand
Say a lemonade stand buys lemons, squeezes them, and sells lemonade.
- The lemons are crude oil.
- The squeezing is the refinery, which turns crude into gas and diesel.
- The difference between what the lemons cost and what the lemonade sells for is the refinery's margin.
Now lemons get more expensive, up about a third. You'd expect lemonade to cost about a third more. Instead, the stand raises some lemonade a lot more than that, and its money per cup goes from about $12 to $42.
That's what happened. The extra money isn't only from the oil costing more. It's mostly in the gap between the oil and the fuel. Shell itself called it "record refining margins" (Shell results via Stock Titan). The Guardian notes the earlier record, set when the Russia-Ukraine war started, was about $28 a barrel (The Guardian).
And here's a strange detail: the war cut Shell's gas production by about a third (The Guardian). It's selling less of some things and still making twice the money.
It's not just one company
This is happening across the industry. TotalEnergies, the big French oil company, reported the same day that its profit jumped 51% from the spring, to $9.1 billion, also thanks to refining margins and gas prices (Investing.com). The U.S. government's energy agency says American refinery margins in the summer were more than double last year's for gasoline, and almost triple for diesel (U.S. Energy Information Administration).
Where does the extra money go?
Not back to drivers. Shell announced it will give $5 billion to its investors over the next three months by buying back its own shares, up from $3 billion. In July through September it paid out $5.3 billion in buybacks and dividends (The Guardian, Shell's unaudited results). Its share price hit a record high this month.
What the oil companies say
To be fair, here's their side. The war that began on February 28 has caused what the International Energy Agency calls "the largest supply disruption in the history of the global oil market." Before the war, about 20 million barrels of oil a day went through the Strait of Hormuz, a narrow sea lane next to Iran. That's about one-fifth of all the oil the world uses (IEA). In March, April and May, the flow fell to an average of just 2.7 million barrels a day (IEA).
Refineries in the Middle East and Russia were also badly damaged, so the world is short on finished fuel, not just crude (The Guardian, EIA). U.S. diesel stocks have dropped below their lowest level of the past five years, which is why diesel jumped the most (Foley & Lardner). When fuel is short, buyers pay whatever it takes, and whoever owns a working refinery collects.
That's the explanation. But an explanation isn't a refund. Either way, drivers pay a lot more, and the companies take home twice as much.
