Avi Salzman — Diesel Margins Soar to Record High. Valero and Marathon Stocks Are Winning.

A refiner doesn't really sell oil — it buys crude, cooks it into diesel, gasoline and jet fuel, and sells those. So what it earns is the gap between what crude costs and what fuel sells for; the industry calls that gap the crack spread. Valero is one of the biggest U.S. refiners, which means its profits track that gap rather than the price of oil.

That gap has just done something it has never done before: the difference between U.S. crude and diesel futures hit $101.86, the first time it has ever reached three figures. American refiners are making roughly triple the profit per barrel they made this time last year. Valero's stock has hit an all-time high in the past few weeks, and Salzman names it first among the biggest beneficiaries.

Why this may persist rather than snap back: the shortage is on the refining side, and refining capacity takes years to add. Ukrainian drones have destroyed a chunk of Russia's refineries, Russia has restricted its own fuel exports into next year, China is keeping fuel at home, and Iran has closed the Strait of Hormuz. Meanwhile more refineries worldwide are closing than opening, and the next real wave of new plants isn't due until 2028–2030. The clean risk: this is a bet on a shortage, so peace deals in Iran and Ukraine — not a fall in the oil price — are what would end it.

Marathon Petroleum is one of the largest refining businesses in the United States and, like Valero, makes its money on the spread between crude in and fuel out rather than on the oil price itself. The article puts it in the headline as one of the two winning stocks, and it too has made an all-time high in the past few weeks.

The scale of what is happening at the pump gives a sense of the squeeze it is capturing: wholesale diesel is up 109% this year and retail diesel is $5.47 a gallon, 48% higher than a year ago. Diesel runs trucks and farm equipment, so there is no easy substitution — and harvest season, just starting, is the heaviest diesel-demand stretch of the year. Bank of America expects the market to stay "tight, volatile, and expensive well into next year."

The thing worth watching is that this is a margin story with a structural clock attached: the world's refining fleet is flat-to-shrinking through 2027, and only in 2028–2030 does new capacity arrive to relieve it.

Phillips 66 is the third refiner the article names as a big beneficiary, and the third whose stock has reached a record high in recent weeks. The economics are the same: buy crude, process it into fuels, keep the difference — a difference that has just set an all-time record.

The reason the record is in fuel and not in oil is worth spelling out. Iran shutting the Strait of Hormuz took about a fifth of the world's oil off the market, which is a crude problem. But the fuel market got hit harder and from more directions at once: Ukraine's drones took 2.8 million barrels of Russian refining capacity offline, Russia then restricted its own diesel and gasoline exports, and China cut fuel exports to protect domestic supply. With three big suppliers withdrawn, the U.S. has become the world's exporter of last resort — American refiners are shipping record weekly volumes of diesel and still can't fill the hole.

In practical terms, owning a refiner here is a way to own the shortage of refining capacity rather than a view on where oil goes. Storage tanks worldwide are unusually empty, so there is no cushion to absorb the next disruption.

Exxon gets one clause here — "major oil companies with refining arms like ExxonMobil are also profiting" — but it matters because it confirms what the company said itself three weeks earlier. On its July earnings call, CEO Darren Woods said the world's fuel deficit would persist and that he expected "a very robust refining market with very high margins," and Exxon backed that by producing more diesel than it ever has.

The difference from a pure refiner is that Exxon sits on both sides of the trade. Its refineries capture the record spread, but its upstream oil production is the part the same war is hurting: the company has said Middle East output would run 750,000 barrels a day below last year if Hormuz stays shut through the third quarter. So it participates in the diesel windfall with a hedge attached — less pure upside than Valero, Marathon or Phillips 66, but also less exposed if the crack spread eventually normalizes.