Exxon CEO Offers Blunt Gas Price Forecast

This article first appeared on GuruFocus.

ExxonMobil (NYSE:XOM) CEO Darren Woods warned that motorists should not expect rapid relief at the pump even when crude oil declines, arguing that constrained global refining capacity has broken the traditional link between raw oil and fuel prices. The shift could keep consumers under pressure while supporting unusually strong refining margins for integrated producers such as Exxon.

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There's a disconnect today because now we have a refinery constraint, Woods told CNBC, explaining that gasoline and diesel prices increasingly reflect the supply of finished products rather than crude alone.

Current data supports that argument. U.S. refineries operated at a elevated 96.1% of capacity in mid-July, yet gasoline inventories remained 7% below their five-year average and distillate inventories were 10% lower. The Energy Information Administration expects tight inventories to prevent wholesale gasoline prices from falling as quickly as crude during the third quarter.

The shortage is already benefiting Exxon's downstream business. Second-quarter adjusted Energy Products earnings rose to $4.10 billion from $2.80 billion sequentially, supported by strong Gulf Coast refinery utilization and record diesel production. Companywide adjusted earnings reached $14.68 billion, while free cash flow climbed to $17.24 billion.

Middle East tensions remain the largest near-term risk. The strait has to open up. It is the main artery of supply for the world that powers economic growth everywhere, Woods said.

He also criticized incoming European methane rules and confirmed Exxon has sent technical teams to evaluate potential Venezuelan investments, although any commitment would require investment protections and acceptable fiscal terms.

Investor Takeaway On ExxonMobil Stock

Investors should watch refining margins, gasoline and diesel inventories, refinery utilization and shipping conditions through the Strait of Hormuz. Continued product scarcity would strengthen Exxon's downstream earnings even if crude prices soften.

However, inventory restocking could eventually reverse that benefit. The EIA expects gasoline supplies to stabilize by late 2026, potentially narrowing refining spreads during the fourth quarter. European regulations could also restrict trade, while Venezuela offers long-term resource potential but carries substantial political and contractual risk. For now, Exxon's integrated refining network provides a valuable earnings hedge against weaker crude prices.

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