Is this why gas is so expensive? Shell makes $7.7B profit in just 3 months - as pump prices hit $7 a gallon

Shell reported first-quarter profits of $7.7 billion on Thursday - thanks largely to strong margins on gas.

The profit - $1.3 billion above Wall Street expectations - comes as gas prices hit an average of around $3.70 a gallon in April, up from about $3.20 in January. 

In some parts of California prices have skyrocketed to $7.29.

The cost of gas the pumps is now higher than a year ago, after months of being on a fairly steady downward trajectory.

Bank of America recently noted that US oil refiners have experienced a 'golden age' of refining thanks to a generally high 'crack spread.' 

That is the difference between the price of crude oil and the cost of gas.

Demand for gasoline and jet fuel has remained high after the pandemic, although margins have slipped from historic peaks in 2022 - after Russia invaded Ukraine. 

Over the quarter, Shell's chemicals and products divisions - which includes the refining busines that turns oil to fuels like gas for cars and trucks - registered a more than threefold rise in profit from the previous quarter to $2.8 billion. 

As well as profits from selling gas to motorists in America and Europe, Shell - based in London - made money from other parts of the business.

Disruption to Red Sea shipping and Russian refining also boosted oil trading, now a vital source of revenue for the company, and liquefied natural gas production rose.

The company's cash flow rose 6 percent from the previous quarter to $13.3 billion. Shell shares were up around 2 percent on Thursday, having risen some 12 percent so far this year.

Shell's liquified natural gas production rose in the quarter by 7 percent from the previous three months to 7.6 million metric tons.

Its overall oil and gas production increased by 3 percent in the first quarter to 2.9 million barrels of oil equivalent per day.

On Thursday, Shell's chief executive Wael Sawan said: 'Shell delivered another quarter of strong operational and financial performance, demonstrating our continued focus on delivering more value with less emissions.'

The refining industry has seen steady growth over the past decade, according to the US Energy Information Administration.

And since the war in Ukraine, bans on the import of Russian refined products were put in place which restricted supply as demand remained strong. 

More recently, outages at Russian refineries because of Ukrainian drone attacks also helped profits, finance chief Sinead Gorman told reporters.

Shell also timed refinery maintenance for the last quarter of 2023 while most of its peers opted for the first quarter of the year, giving it a further advantage in supplying oil products such as gasoline and diesel, Gorman said.

In a nod to investors, the company said it will buy back a further $3.5 billion of its shares over the next three months, at a similar rate to the previous quarter. Its dividend remained unchanged.