Exxon Mobil and Chevron Face Tariffs, Hurting Refining Profits

Exxon Mobil Corp. and Chevron Corp.'s profits plummeted due to falling fuel margins amid concerns that US tariffs on Canada and Mexico will exacerbate the refining industry crisis.

Slumping Refining Profits

Exxon reported a 67% decline in refining profits in 2024, while Chevron experienced a steeper 72% drop. The decline reflects the global challenge of oversupply and stagnant demand.

Threatening Tariffs

US President Donald Trump's proposed tariffs on Canada and Mexico, key crude sources for US refineries, could increase the cost of producing gasoline, diesel, and jet fuel. Refineries in the Midwest and Gulf Coast rely heavily on Canadian and Mexican oil, respectively.

Chevron's Advantage

Chevron's CEO, Mike Wirth, noted that its coastal refineries have easier access to overseas crude, reducing the potential impact of tariffs. However, he acknowledged that refineries heavily dependent on Canada and Mexico could face significant challenges.

Exxon's Full-Year Earnings

Exxon's refining earnings fell from $12.1 billion in 2023 to $4 billion in 2024, while Chevron's global refining earnings dropped from $6.1 billion to $1.7 billion.

Industry Concerns

Valero Energy Corp., the third-largest US refiner, warned of potential fuel production cuts if tariffs are implemented. Independent refiners, like Valero, rely heavily on Mexican oil.

Exxon and Chevron's Earnings Beat and Miss

Exxon exceeded consensus quarterly earnings forecasts by 12 cents, reporting $1.67 per share. Chevron fell short, reporting $2.06 per share, 5 cents below expectations.

Capital Spending and Dividends

Exxon increased capital spending to over $30 billion annually, aiming to drive down its breakeven oil price to $30 per barrel by 2029. Chevron hiked dividends by 5% despite underperforming profits.

Outlook

Brent crude prices declined by 11% in Q4 2024, pressuring oil companies' cash flow and shareholder distributions. However, both Exxon and Chevron expressed optimism about future cash flow growth driven by new projects.