How Declining Gasoline Prices Are Set to Affect Marathon Petroleum’s Profit Margins

Key Insights

• U.S. gasoline prices declined in late 2023, squeezing refining margins for Marathon Petroleum and its industry rivals.
• Despite a rise in midstream pipeline earnings, analysts predict it won’t fully offset the drop in refining profits ahead of the company’s next quarterly announcement.
• Growing gasoline inventories may continue to exert downward pressure on Marathon Petroleum’s product prices throughout 2024.

Market analysts forecast a significant drop in Marathon Petroleum Corp.’s (MPC) fourth-quarter earnings, largely due to shrinking margins in its refining segment caused by falling gasoline prices. The company is expected to report earnings of approximately $835.9 million, or $2.22 per share, according to consensus estimates from Visible Alpha. This represents a steep 73% decrease compared to the $3.1 billion, or $7.09 per share, earned during the same quarter last year.

Visible Alpha data suggests that while the company’s midstream pipeline segment saw a 9% increase in pretax profits, reaching $1.2 billion, the refining and marketing division—which traditionally generates the majority of Marathon’s revenue—is projected to see pretax earnings fall by 86% to $566 million.

U.S. retail gasoline prices averaged $3.48 per gallon in the fourth quarter of 2023, down from $3.87 in the third quarter and $3.68 in the same quarter of 2022. Prices steadily declined over the quarter, starting at $3.93 and dropping to $3.28.

The U.S. Energy Information Administration forecasts that gasoline prices will average around $3.40 per gallon in 2024, approximately 10 cents lower than in 2023, driven by increasing gasoline inventories.

Over the past year, Marathon Petroleum’s shares have risen roughly 20%, reaching record highs this month.

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