Somewhere between the Strait of Hormuz and a spreadsheet in lower Manhattan, the oil market has misplaced roughly a billion barrels. Nobody is more surprised than the people paid to count them.
Start with what we can see. American refiners — the plants that turn crude oil into gasoline and diesel — are running at 97.2% of capacity, the hardest they have run since 2018. When a machine that size runs that hot, the money shows up fast.
Exxon Mobil (XOM) earned $14.5 billion last quarter, $5.5 billion of it from refining — four times last year’s take. Marathon Petroleum (MPC) made $5.1 billion. Valero (VLO) made $3.7 billion, five times last year. Phillips 66 (PSX) made $3.8 billion, four times. Marathon and Valero shares are each up about 85% this year.
| Refiner | Q2 profit | Note |
|---|---|---|
| Exxon Mobil (XOM) | $14.5B | $5.5B from refining, roughly 4x a year ago |
| Marathon Petroleum (MPC) | $5.1B | Shares up about 85% YTD |
| Valero (VLO) | $3.7B | Roughly 5x a year ago; shares up about 85% YTD |
| Phillips 66 (PSX) | $3.8B | Roughly 4x a year ago |
Why the squeeze
The reason is grim and simple. About 5 million barrels a day of the world’s refining capacity is offline — knocked out by the Mideast conflict and by Ukraine’s strikes on Russia, which have shut down roughly a third of Russian refining. American diesel is leaving the country at a record 1.9 million barrels a day to fill the gap.
And America cannot simply build more. More than two dozen U.S. refineries have closed since 2000. The first genuinely new one since 1977 was unveiled in South Texas only this March. Traders expect the squeeze to last through the end of 2027.
The barrels themselves are scarce too. U.S. crude stockpiles sit at 711.8 million barrels, the lowest in 42 years. Saudi Arabia shipped zero crude to the United States in July — the first zero since the records began in 1985.
Gasoline averages $4.06 a gallon. The President has said he wants $2.50. The midterms are three months away — timing the Journal was too polite to call anything but awkward.
The missing barrels
Given all that — record refinery runs, 42-year-low stockpiles, a war on two fronts — crude should be expensive and getting more so. Instead, crude was the single worst-performing asset of the week, down 7.67%.
The Journal’s Spencer Jakab did the arithmetic, and it is genuinely strange. Brent, the world benchmark price, is back near $83. For prices to be this calm, the world would need to have destroyed about a billion barrels of demand — roughly 6% of consumption, twice the hit from the 2008 financial crisis. Markets researcher Bob Elliott calls that idea far-fetched.
The alternative explanations read like a detective’s corkboard. The Hormuz blockade “sprang leaks” — tankers sneaked through, and pipelines rerouted around it. Governments quietly released reserves. China bought less. Some barrels may sit in stockpiles nobody tracks.
Eric Nuttall, an energy fund manager at Ninepoint, finds the picture “mystifying” — and calls the shortage of available tankers a “ticking time bomb.” Iran, for its part, has named its price for reopening the strait: the U.S. Navy leaves. So the geography is not settled either.
Own the toll booth
Here is our honest position. We do not know where the barrels went, and neither, apparently, does anyone else.
When the smartest people in the market cannot agree on world supply to within a billion barrels, betting on the price of crude is not analysis. It is a coin flip with homework.
So we do not bet on the count. We bet on the toll booth — the pipelines and energy giants that collect a fee as oil and gas move, whatever the price does.
A billion barrels are missing. The toll collector does not need to find them. He just needs traffic.