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May 7, 2011, 11:20:39 AM5/7/11
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Oil Companies Are Making More Money and Less Fuel
By Ronald D. White, Los Angeles Times
29 April 11
http://www.latimes.com/business/la-fi-oil-refineries-20110429,0,1414360,full.storyRefiners including Exxon Mobil are raking in profits while producing lessgasoline and diesel in the US than usual for this time of year. They're alsoexporting more to foreign countries. With oil prices rising, that makes forsticker shock at the pump.asoline prices are skyrocketing - and so are oil company profits.Exxon Mobil Corp. earned nearly $11 billion in the first three months of theyear, a rollicking 69% increase over its performance for the same periodlast year. That's on sales of $114 billion.It's the same story for the other big oil companies. Royal Dutch Shellturned a profit of $6.3 billion in the first quarter, and BP - despitelingering costs from the Gulf Coast oil spill - made $7.1 billion.What they aren't making is fuel, at least not in normal quantities. Andthat's a key factor in their reinvigorated financial performance.Despite increasing demand, refiners are producing less gasoline and dieselin the US than usual for this time of year. They're also exporting more toforeign countries.Add rising oil prices, and you get the kind of sticker shock at the gas pumpthat some analysts say could challenge 2008's all-time highs - with regulargas already averaging about $3.88 a gallon in the US and $4.22 inCalifornia, more than a month before the summer driving season kicks in.Motorists and consumer advocates are outraged at high pump prices and sayrefineries need to increase gasoline supplies to reduce fuel costs."This is a page torn right out of the handbook of gouge-onomics," saidCharles Langley, senior gasoline analyst at the Utility Consumers' ActionNetwork in San Diego. "We call it the law of supply and demand: They supplyless product and demand more money for it."Oil makes up about two-thirds of the cost of a gallon of gas, so expensiveoil always turns into expensive fuel. But as for-profit entities, refinersuse a variety of means to ensure that they keep as much of that windfall aspossible.The nation's refineries are operating at about 81% of their productioncapacity, Energy Department statistics show. That compares with a 20-yearhistoric average of about 89% for this time of year, according to departmentrecords.Part of that can be explained by the increasing use of ethanol, usually madefrom corn, which is added after gasoline is refined. Ethanol boosts fuelsupply without increasing petroleum consumption just as adding crackers tomeatloaf makes more dinner with less beef.A bigger factor, some experts say, is refiners' business strategy: Havingonly recently returned to strong profits and leery of potential erosion inconsumption, the companies are playing it cautiously."They aren't going to try to match production to demand. You aren't going tosee anyone running full out right now," said Brian L. Milne, refined-fuelseditor for Telvent DTN, which provides commodity price information tobusinesses.And here's another piece to the fuel-price puzzle: Refiners are exportinglarge amounts of gasoline and diesel to foreign buyers willing to pay apremium. Demand for refined products such as gasoline is expected to go backinto decline in the US by the end of 2011 because of increased use ofalternative fuels, among other things, so refinery companies are looking tobroaden their reach with new customers overseas, particularly with dieselfuel."US refineries have been sending 15% to 20% of their production overseas forabout a year now," said Andrew Lipow, president of consulting firm Lipow OilAssociates in Houston. "Demand for diesel is strong in Central America andSouth America and Europe and other parts of the world." That's more thandouble the rate of exports in 2007, he said.Valero Energy Corp., the nation's biggest independent oil refiner, had"record exports coming from the United States" during the last three monthsof 2010, Chief Executive Bill Klesse recently told investors and analysts.The San Antonio company's export pace declined somewhat this year because ofrefinery maintenance.
By Ronald D. White, Los Angeles Times
29 April 11
http://www.latimes.com/business/la-fi-oil-refineries-20110429,0,1414360,full.storyRefiners including Exxon Mobil are raking in profits while producing lessgasoline and diesel in the US than usual for this time of year. They're alsoexporting more to foreign countries. With oil prices rising, that makes forsticker shock at the pump.asoline prices are skyrocketing - and so are oil company profits.Exxon Mobil Corp. earned nearly $11 billion in the first three months of theyear, a rollicking 69% increase over its performance for the same periodlast year. That's on sales of $114 billion.It's the same story for the other big oil companies. Royal Dutch Shellturned a profit of $6.3 billion in the first quarter, and BP - despitelingering costs from the Gulf Coast oil spill - made $7.1 billion.What they aren't making is fuel, at least not in normal quantities. Andthat's a key factor in their reinvigorated financial performance.Despite increasing demand, refiners are producing less gasoline and dieselin the US than usual for this time of year. They're also exporting more toforeign countries.Add rising oil prices, and you get the kind of sticker shock at the gas pumpthat some analysts say could challenge 2008's all-time highs - with regulargas already averaging about $3.88 a gallon in the US and $4.22 inCalifornia, more than a month before the summer driving season kicks in.Motorists and consumer advocates are outraged at high pump prices and sayrefineries need to increase gasoline supplies to reduce fuel costs."This is a page torn right out of the handbook of gouge-onomics," saidCharles Langley, senior gasoline analyst at the Utility Consumers' ActionNetwork in San Diego. "We call it the law of supply and demand: They supplyless product and demand more money for it."Oil makes up about two-thirds of the cost of a gallon of gas, so expensiveoil always turns into expensive fuel. But as for-profit entities, refinersuse a variety of means to ensure that they keep as much of that windfall aspossible.The nation's refineries are operating at about 81% of their productioncapacity, Energy Department statistics show. That compares with a 20-yearhistoric average of about 89% for this time of year, according to departmentrecords.Part of that can be explained by the increasing use of ethanol, usually madefrom corn, which is added after gasoline is refined. Ethanol boosts fuelsupply without increasing petroleum consumption just as adding crackers tomeatloaf makes more dinner with less beef.A bigger factor, some experts say, is refiners' business strategy: Havingonly recently returned to strong profits and leery of potential erosion inconsumption, the companies are playing it cautiously."They aren't going to try to match production to demand. You aren't going tosee anyone running full out right now," said Brian L. Milne, refined-fuelseditor for Telvent DTN, which provides commodity price information tobusinesses.And here's another piece to the fuel-price puzzle: Refiners are exportinglarge amounts of gasoline and diesel to foreign buyers willing to pay apremium. Demand for refined products such as gasoline is expected to go backinto decline in the US by the end of 2011 because of increased use ofalternative fuels, among other things, so refinery companies are looking tobroaden their reach with new customers overseas, particularly with dieselfuel."US refineries have been sending 15% to 20% of their production overseas forabout a year now," said Andrew Lipow, president of consulting firm Lipow OilAssociates in Houston. "Demand for diesel is strong in Central America andSouth America and Europe and other parts of the world." That's more thandouble the rate of exports in 2007, he said.Valero Energy Corp., the nation's biggest independent oil refiner, had"record exports coming from the United States" during the last three monthsof 2010, Chief Executive Bill Klesse recently told investors and analysts.The San Antonio company's export pace declined somewhat this year because ofrefinery maintenance.
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