HOUSTON (Bloomberg) -- If Big Oil was a two-engine airplane, you could say it’s been flying on a single engine since energy prices crashed in 2014. Now, the second motor is sputtering.

 

The major integrated oil companies, including Exxon Mobil Corp., Total SA and BP Plc, have relied on their downstream businesses to cushion the losses on their upstream units.

 

“The crash in oil prices in late 2014 brought refineries worldwide a pleasant surprise: booming margins,” said Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd. in London. “But now, the market is changing.”

 

BP, the first major to report second-quarter results, showed the impact on Tuesday. The British company said its downstream earnings fell to $1.51 billion from $1.81 billion in the first quarter and $1.87 billion a year ago. Refining margins were the weakest for the April-to-June period in six years, BP said.

 

Worse, the company said the refining margins will remain “under significant pressure.” So far in the third quarter, its in-house measure of margins stood at $10.70/bbl, little more than half the $20 it achieved between July and September 2015. Valero Energy Corp., the largest U.S. refiner, also said on Tuesday it faced “weaker gasoline and distillate margins” during the quarter.

 

While the downstream business is sputtering, it’s still keeping the plane aloft. Margins remain well above the depressed levels of $5 to $7/bbl of the late 1990s and early 2000s.

 

In part, Big Oil sowed the seeds of its problem. Companies pushed their refining units as hard as possible in late 2015 and early 2016, using them to cushion the impact of low energy prices. All went well while demand growth was robust, but as soon as it slowed, refined products, particularly gasoline, swamped the market.

 

U.S. gasoline futures briefly fell below $1.31 per gallon on Tuesday, the lowest for this time of the year in at least a decade, before closing 0.9% higher. Prices were down 0.5% at $1.34 at 11:13 a.m. in London. The drop in gasoline is dragging down crude as investors fear that refiners, facing low margins, will cut processing rates. West Texas Intermediate traded at $42.66/bbl Wednesday, down about 17% from its most recent peak of $51.67 in early June.

 

Getting Worse

 

With oil and natural gas production barely profitable at current prices, the drop in refining margins foreshadows a difficult second half for majors that rely on their integrated model of upstream and downstream businesses to cushion periods of low prices.

 

Over the last few quarters, downstream “has been the key cash generator” for major oil companies, Nitin Sharma, an oil analyst at JPMorgan Chase & Co. in London, said in a note to clients ahead of the reporting season. With refining now faltering, Harold “Skip” York, V.P. of integrated energy at consulting firm Wood Mackenzie Ltd. in Houston, said companies will need to tighten their belts further.

 

“The majors aren’t going to get the cash flow from downstream that they were hoping,” he said. “They have some discretionary capital spending they could cut in 2017.”

 

BP signaled the path ahead, tweaking its forecast for capital investments in 2016 from “about” $17 billion to “below” the same figure. Since the crisis started, Big Oil bosses have been trying to lighten their loads to weather the storm. BP, for example, spent nearly $23 billion in 2014. For next year, it’s likely to invest as little as $15 billion.

 

Royal Dutch Shell Plc and Total are scheduled to publish earnings on Thursday, and Exxon and Chevron Corp. the following day.