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From Integrated Oil Companies See Potential Profitability in Refining Operations

How could Shell's integrated refining operations affect Twice Daily's retail operations?

Possible What happens if… A possibility worth considering, not a forecast.

High refining profits may influence Twice Daily's fuel pricing and revenue. The high profitability generated by Shell's integrated refining facilities could influence the operational and pricing strategies of its subsidiary, Twice Daily. Reports indicate that refiners are currently making enormous profits, with a barrel of WTI yielding approximately $96.78 in profit today, representing a 200% increase from a year ago. Since Twice Daily operates within Shell's retail network, the overall financial health and fuel pricing dynamics of the parent company's refining operations dictate the market conditions and pricing structure for the convenience store.

Reported by 2 independent outlets Written Oct 12
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The facts so far

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  • Refiners are generating enormous profits today, with a barrel of WTI yielding about $96.78 in profit.dailyreckoning.com
  • The profit per barrel for refiners has increased by 200% in one year.dailyreckoning.com

Why it matters

Shell's reliance on integrated operations allows it to capture significant value when refining margins are high, a trend driven by global supply constraints and product price disconnection from crude oil prices. This profitability is crucial for the company's financial stability and dictates the pricing power it holds across its entire retail network, including its convenience store subsidiary, Twice Daily.

Globally, refining capacity is under pressure due to conflicts, such as the attacks by Yemeni Houthis on Saudi Arabia’s East/West pipeline and refining assets, and Ukraine's attacks on Russian refineries. This scarcity, combined with the strength of the U.S. domestic oil industry, creates a unique environment where refiners can achieve record profits, but also introduces risks related to global trade and government export bans.

What we don't know yet

  • How will Shell manage the risk of a potential U.S. government export ban on fuels?
  • Will the high refining profits be maintained if the Strait of Hormuz opens and oil prices fall?

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What would change this answer

The Strait of Hormuz suddenly opens and oil prices fall significantly.Refiner profits could still increase if distillates only fall less than the cost of oil, potentially stabilizing or increasing Twice Daily's margins.
The U.S. government implements an export ban on fuels.U.S. refiners, including those feeding Shell's network, would be hurt, leading to a dramatic fall in prices and massive profit taking.

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The full eventIntegrated Oil Companies See Potential Profitability in Refining Operations Everything aboutTwice Daily

Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.