Shell forecasts record refining profits as global fuel shortages drive margins higher

In a market trading update on Wednesday, Shell confirmed that its refining margins have been lifted by a steep increase in the price of refined fuels, particularly diesel, relative to the cost of crude oil. The diesel premium over the global oil benchmark jumped above $100 a barrel for the first time, indicating record profits from converting crude into fuels.

The Middle East crisis has already helped Europe's biggest oil and gas company to a profit of almost $10bn (£7.5bn) for the second quarter of 2026, more than double the figure for the same period last year and its second highest quarterly earnings on record. Shell's share price climbed to a record high of £36.23 at the end of last month, making it the second largest company on the UK's FTSE 100 index.

Global oil prices were slightly lower in the third quarter. Brent crude averaged $85.60 a barrel, compared with $97.05 in the second quarter, but still well above the $68.14 recorded a year earlier. European gas prices more than doubled over the summer, with the benchmark index reaching €70.50 in August.

Shell's gas production has been hit by the Iran crisis, which damaged a key gas processing facility in the Gulf, cutting prewar output of 900,000 barrels of oil equivalent per day by a third. The company now expects gas production to climb to between 740,000 and 780,000 BOED, up sharply from its previous forecast of 570,000 to 630,000 BOED for the quarter.

TotalEnergies, which operates Europe's largest refining capacity alongside Shell, also welcomed the opportunities created by the global energy crisis. Chief executive Patrick Pouyanné told an industry conference in London this week: "We're doing really well by being integrated. Integration means your refineries in Europe, which you thought were liabilities, are suddenly becoming goldmines."

Analysis

Why This Matters

Record refining margins mean higher costs for consumers at the pump, particularly for diesel, which has seen unprecedented price spikes.
The report underscores how geopolitical instability in the Middle East and Russia is reshaping global energy markets and benefiting major oil companies.
Calls for windfall taxes on energy profits are likely to intensify as households and businesses face continued high fuel and heating bills.

Background

The global energy crisis has deepened through 2026 following the outbreak of conflict in the Middle East and ongoing sanctions on Russian oil and gas. The shutdown of war-damaged refineries in both regions has severely squeezed supplies of refined fuels such as diesel, pushing profit margins for operators of remaining refineries to record levels. Shell and TotalEnergies, as owners of Europe's largest refineries, have been among the biggest beneficiaries.

Key Perspectives

Shell and TotalEnergies: The companies argue that their integrated business models — spanning extraction, refining, and trading — allow them to profit from supply disruptions. TotalEnergies CEO Patrick Pouyanné described European refineries as "goldmines" amid the crisis, highlighting a shift in perception from earlier years when they were seen as liabilities. Consumer and environmental groups: Critics are likely to point out that such windfall profits come at the expense of households and businesses struggling with high energy prices. Campaigners have previously called for increased taxation on oil and gas profits to fund support for vulnerable consumers and accelerate the transition to renewable energy.

What to Watch

Shell's full third-quarter earnings report, expected later this month, which will confirm actual margins and profits.
Diesel prices and the premium over crude oil; any easing could signal relief for transport and logistics costs.
Political reactions, particularly in Europe and the UK, where governments may face renewed pressure to introduce or extend windfall taxes on energy producers.

Analysis

Why This Matters

Background

Key Perspectives

What to Watch

Sources