Refiners pay more for crude

Refiners are paying sharply more for crude, and the higher feedstock bill is squeezing the money they make turning oil into fuel. (eia.gov) A refinery’s core math is simple: buy crude, process it, and sell gasoline, diesel, and jet fuel. The U.S. Energy Information Administration says refinery margins are the value of those products minus the cost of crude, so a jump in crude costs cuts margins unless fuel prices rise just as fast. (eia.gov 1) (eia.gov 2) That crude bill has risen fast in 2026. The Energy Information Administration said Brent averaged $103 a barrel in March, after averaging $71 in February, and it projected Brent to peak at $115 a barrel in the second quarter. (eia.gov 1) (eia.gov 2) For U.S. refiners, the government’s own acquisition-cost data shows the average composite crude cost rose to $65.33 a barrel in February 2026 from $59.09 in December 2025. Domestic crude rose to $65.82, and imported crude rose to $64.55, before the biggest March-April price shock hit. (eia.gov) The squeeze is even harsher in the physical market, where refiners buy the specific grades their equipment is designed to run. Bloomberg reported on March 20 that replacement barrels for missing Middle East cargoes were trading at premiums of $10 a barrel or more over benchmark prices, with some U.S. crude delivered into Asia fetching $12 to $15 above Dated Brent. (ttnews.com) Those premiums matter because most refineries cannot swap any barrel for any other barrel without losing efficiency or changing output. Bloomberg said Norway’s Johan Sverdrup traded at a record $11.30 a barrel over Dated Brent on March 19, while U.S. Mars crude had jumped to $11 over benchmark futures earlier in March. (ttnews.com) The move started after the oil market changed abruptly at the end of February. Morningstar said U.S. military action against Iran on February 28 and the later closure of the Strait of Hormuz disrupted flows of 8 million to 10 million barrels a day of crude and 6 million barrels a day of refined products. (morningstar.com) That disruption also changed the usual relationship between global and U.S. crude prices. The Energy Information Administration said the Brent-West Texas Intermediate spread widened to $12 a barrel in March from $6 in February and was expected to peak at $15 in April because Brent was more exposed to the global supply shock. (eia.gov) Consumers feel the same pressure at the pump, even when refiners’ margins do not expand. The Energy Information Administration said crude oil typically makes up about half the retail gasoline price, and it forecast average U.S. gasoline at nearly $4.30 a gallon and diesel above $5.80 a gallon in April. (eia.gov) Some refiners are still benefiting where diesel prices have climbed faster than crude, especially in the United States. Morningstar said diesel margins surged after Middle East refiners lost export capacity, but it also said current valuations assume those elevated margins last longer than normal mid-cycle conditions. (morningstar.com) The immediate story is not just that oil is expensive. It is that the right barrels are scarce, replacement grades are carrying double-digit premiums, and refiners are paying up to keep plants running. (ttnews.com)