ExxonMobil’s CEO says refinery constraints—not just crude oil prices—are increasingly determining what motorists pay at the pump. Michigan experts say global conflicts, refinery outages and uncertainty are keeping fuel markets volatile. Part Two Of A Series On How Oil Prices Impact Michigan’s Economy.
ANN ARBOR – Michigan drivers hoping that easing tensions in the Middle East will quickly translate into lower gasoline prices may be disappointed.
After crude oil prices retreated from their biggest one-day jump since 2020, many motorists expected relief at the pump. But according to the CEO of the nation’s largest oil company and an independent petroleum analyst, gasoline prices are increasingly being driven by refinery constraints, global supply disruptions and market uncertainty—not crude oil alone.
ExxonMobil CEO Darren Woods said the relationship between crude oil and gasoline prices has changed as refining capacity has become a growing bottleneck.
“Pump prices are being established by the supply and demand of refined petroleum products, not crude,” Woods said during the company’s second-quarter earnings discussion. “There’s a disconnect today because we now have a refinery constraint.”
Why Gas Prices Don’t Always Follow Oil Prices
Five factors affecting Michigan pump prices:
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Crude oil prices
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Refinery capacity and outages
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Global supply and demand
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Seasonal gasoline demand
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Geopolitical events, including the Middle East, Ukraine and hurricane season
Michigan Already Feeling Multiple Pressures
Patrick De Haan, head of petroleum analysis for GasBuddy, said Michigan gasoline prices are being influenced by far more than the cost of crude oil.
Instead, a combination of refinery outages, geopolitical conflicts and supply disruptions are all affecting what motorists ultimately pay.
“Price increases in Michigan have been driven by many factors, including refinery outages that happened from severe weather last week, but also the price of oil, and countless Ukraine attacks on Russian oil refineries,” De Haan told MITechNews.
He said the Middle East remains another important source of uncertainty.
“The Iran situation isn’t over. It’s still impacting prices, just as Ukraine attacks on Russian oil refineries are still very influential.”
That uncertainty is one reason analysts believe gasoline prices could remain volatile even if crude oil prices continue to fluctuate.
Oil Companies Don’t Set Gas Prices
The latest comments from ExxonMobil CEO Darren Woods also challenge a common perception among consumers—that oil companies simply decide what gasoline will cost.
Instead, Woods argued that refiners and fuel marketers operate within a global commodity market where prices are largely established by supply and demand.
De Haan agrees.
“Oil companies remain price takers and not price makers,” he said. “When there’s less oil available on the market globally, what oil is produced is worth more, and conversely the opposite is true as well.”
He pointed to the COVID-19 pandemic as evidence that the market works both ways.
When global demand collapsed in 2020, crude oil prices plunged and many major oil companies reported billions of dollars in losses.
“Economics determines their profitability, they don’t. They sell at whatever the prevailing price is.”
Trump Calls For Lower Prices
President Donald Trump has urged major oil companies to lower gasoline prices, arguing that consumers should benefit more quickly when crude oil prices ease.
Industry executives and petroleum analysts, however, contend that gasoline prices are largely determined by competitive market forces rather than unilateral decisions by producers.
Woods argues that refining capacity has become the critical constraint.
If refineries are offline because of maintenance, severe weather or unexpected outages, gasoline supplies can tighten even when crude oil itself becomes less expensive.
That dynamic helps explain why motorists sometimes continue paying higher prices even after crude oil retreats.
Michigan Economy Still At Risk
While this story focuses on gasoline prices, the broader economic implications extend well beyond what consumers pay at the pump.
Patrick Anderson, principal and CEO of Anderson Economic Group in East Lansing, said Michigan’s manufacturing-heavy economy remains particularly vulnerable to higher energy costs.
“Higher oil prices hurt Michigan’s economy two ways,” Anderson said. “First, it makes our manufacturing and agricultural products more expensive to build and get to market. Second, it discourages people from buying cars.”
Higher diesel prices also increase shipping costs for manufacturers, distributors and retailers, adding pressure throughout Michigan’s supply chain.
Anderson noted that Michigan’s oil and gas industry benefits somewhat from higher prices, but not nearly enough to offset the broader economic impact.
“That is offset by a modest gain for our own oil & gas industry.”
He also questioned the assumption that higher gasoline prices automatically encourage consumers to switch to electric vehicles.
“It doesn’t really help electric vehicles that much, because higher oil price go directly into the electricity prices in almost all states, as natural gas is a major source for electricity.”
More Volatility Ahead
Despite crude oil’s recent pullback, De Haan said consumers shouldn’t expect a smooth ride at the pump.
Several major uncertainties remain, including tensions involving Iran, continued attacks on Russian energy infrastructure and the peak of Atlantic hurricane season, which can disrupt refining operations along the Gulf Coast.
“That’s more a function of uncertainty — Iran/U.S., Ukraine/Russia and hurricane season,” De Haan said. “I’d guess $3.50 to $5 a gallon. Anything in that range is possible with the higher uncertainty over geopolitical tensions.”
For businesses with significant transportation costs, he suggested taking steps now to limit exposure to fuel-price swings.
“I’d probably be reducing my exposure to the sudden surge by charging a fuel surcharge.”
The recent swings in crude oil prices highlight an important lesson for Michigan consumers and businesses.
While falling oil prices often receive headlines, they are no longer the only—or even the primary—factor determining what motorists pay at the pump.
Refinery capacity, severe weather, global conflicts, supply-chain disruptions and market uncertainty all play an increasingly important role.
For Michigan, where manufacturing, transportation and the auto industry remain central to the state’s economy, that means businesses and consumers should prepare for continued volatility even if crude oil prices continue to ease.
