Valero Chief Operating Officer Gary Simmons told analysts he anticipates margins improving again after a pullback. He pointed to two elements of President Donald Trump's push to lower energy prices - strategic reserve releases and looser sanctions on Russian fuel - and said those headlines have weighed on cracks in the short run.
"Some of the downward pressure on cracks is really related to more headlines," Simmons said. Once you look at actual volumes and recognize that easing sanctions mostly reroutes trade, he added, "I think we'll see a recovery in cracks moving forward."
Valero posted $6.8 billion in net income last quarter, its largest result to date. Analysts broadly anticipate the third quarter will deliver outsize profits for US refiners because fuel production has been the pinch point amid broader energy-market upheaval tied to the US-Iran war and the Russia-Ukraine conflict.
Plants have been running close to their limits in recent months to capture diesel margins well above $100 per barrel and gasoline margins up to $60 per barrel. Although crack spreads have come off the record highs set in the third quarter over the past few weeks, Simmons expects them to rise again. He also called gasoline fundamentals "very, very strong," and said export demand for diesel also looks strong, noting diesel's central role in heating, farming and transportation.
Simmons said a fuel supply arrangement between Russian President Vladimir Putin and Trump is not a "significant volume," with flows still running below levels from the same period in 2025. He added that restoring Russian refining capacity damaged by Ukrainian strikes will likely take considerable time, citing consultant estimates.
Retail gasoline and diesel prices are at their highest levels for this time of year. If refining margins widen again, pump prices could move higher.
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The White House has signaled it is looking at reopening recently closed refineries to add supply. An idled facility in the US Virgin Islands plans to restart next year, aided by interest from the US government and investors, along with a commercial offtaker ready to purchase its production.
According to Valero's General Counsel Rich Walsh, the company does not intend to bring back online its shuttered refinery in Benicia, California, which was closed in April. Any restart is complicated, Chief Executive Officer Lane Riggs said. "Almost any refinery that's been shut down will take a while to start up, so it would be very difficult for them to help the prompt situation." He added, "The idea that there's these refineries that you can sort of walk in and flip the lights and they're going to start running is not exactly the case."
Refining margins drive both earnings for companies like Valero and the prices customers see at the pump. With cracks likely to firm and seasonal pump prices already elevated, energy equities and inflation-sensitive corners of the market stay in focus.
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