The Oil Story Everyone's Telling You Is Wrong. Here's What's Actually Driving Prices at the Pump.

Last week, gasoline was clocking in at about $4.40 a gallon nationally. Diesel came in at around $6.37, up from just $3.70 a year ago. Yet West Texas Intermediate crude oil had fallen to roughly $90 a barrel after reaching $119 in March.

Now, if crude oil were the whole story, those numbers wouldn't make much sense. But the bigger problem right now isn't necessarily finding oil. It's turning that oil into gasoline, diesel, and jet fuel -- and certain companies are benefiting most.

The bottleneck is at the refinery

Crude oil doesn't go directly from an oil well into your gas tank. It first has to be processed through a refinery, where it's converted into gasoline, diesel, jet fuel, and other products. And right now, global refining capacity is tight.

Image source: Getty Images.

The U.S. had 130 operable refineries at the beginning of 2026. Total operable distillation capacity stood at approximately 18.2 million barrels per day, down more than 250,000 barrels per day from a year earlier. Two refinery closures during 2025 removed roughly 400,000 barrels per day of capacity, with smaller expansions elsewhere offsetting part of the decline.

Globally, the situation has become even tighter. Attacks on Russian refineries have reduced supplies of refined products, while disruptions in the Persian Gulf have restricted shipments of fuels such as diesel and jet fuel. More recently, Chinese refiners suspended exports of oil products to destinations outside Hong Kong and Macao, putting additional pressure on already-tight global fuel supplies. That's why crude prices can fall while fuel prices remain elevated.

JPMorgan Chase recently estimated that Persian Gulf oil exports were only about 11% below pre-war levels. Refined-product exports, however, remained approximately 42% below normal. Indeed, there's plenty of crude moving around. The shortage is increasingly about what happens after the crude leaves the barrel.

Refiners are making a lot more money

You can see the impact in refining margins. Look at Marathon Petroleum (NYSE: MPC), for instance. Its refining and marketing margin reached $36.33 per barrel during the second quarter, up from $17.58 a year earlier. Refining and marketing adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped from $1.9 billion to $6.7 billion. Marathon's refineries were running at 94% utilization and processing approximately 2.9 million barrels per day.

Valero Energy (NYSE: VLO) is seeing the same trend. Its refining business generated $4.5 billion in operating income during Q2, up from $1.3 billion a year earlier. Refinery throughput averaged approximately 3 million barrels per day. Those numbers explain exactly why you shouldn't automatically assume higher fuel prices mean oil producers are capturing all the upside. There's no doubt about it. The value of refining crude into usable products has increased dramatically.

Diesel could keep the pressure on

Overall, diesel may be the biggest issue. U.S. diesel inventories recently fell to their lowest level for this time of year since records began in 1982, and the Energy Information Administration expects distillate inventories to fall below 100 million barrels and remain unusually low through the end of 2026.

That's especially problematic heading into fall and winter. Diesel demand typically increases during harvest season, while heating oil demand rises as temperatures fall. Refineries can shift their production mix somewhat, but there's a limit to how much gasoline, diesel, and jet fuel they can produce from each barrel of crude.

The result is a bottleneck that can't be fixed simply by pumping more oil. Yes, oil producers still benefit from elevated crude prices. But Marathon and Valero, for instance, are sitting directly at the point where today's supply constraints are most severe.

Of course, fuel prices could fall if disrupted refining capacity returns, global inventories rebuild, or demand weakens. Governments are already releasing emergency fuel inventories in an effort to ease the shortage.

But right now, the biggest energy shortage is still refining capacity. And as long as gasoline, diesel, and jet fuel remain scarce relative to crude, companies that can turn millions of barrels of oil into those products every day, such as Marathon Petroleum and Valero Energy, could remain among the biggest beneficiaries.

JPMorgan Chase is an advertising partner of Motley Fool Money. Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.