Who to hate when you fill your gas tank

http://slate.msn.com/id/2125900/?nav=tap3

This summer, refiners’ profit margins began to expand. For much of the past year, the so-called “cracking spread”—the difference between what refiners pay per barrel of crude and what they charge per barrel of refined product—stood at around $10, higher than the recent historical average. As a result, refining stocks suddenly became hot. The Financial Times “Lex” column noted that the stock of Valero, the largest independent refiner, was up 226 percent in the past year, outpacing Google’s 186 percent rise. (Here’s a one-year chart of the two stocks.)

When Katrina plowed ashore, it looked like bad news for the refining industry. A bunch of Gulf Coast refineries—representing about 10 percent of the nation’s refining capacity—were knocked out of service and damaged. But this bad news for a few has outweighed by good news for the many.

The hurricane curtailed oil production along with refining capacity, but demand for gas didn’t contract. The result: The price of gasoline at the pump shot up rapidly, driven by distribution problems, panic buying, and perhaps some price gouging. The Department of Energy reported that as of Sept. 5, the average weekly retail gasoline price increased to $3.07—up 45.9 cents, or 18 percent, from the previous week. But in the same week, the price of crude actually fell. The spot-market price of a barrel of West Texas crude actually fell from $67.20 on Aug. 29 to $64.37 per barrel on Sept. 6, according to the Department of Energy.

In a matter of days, then, the spread between the cost of crude and the finished product expanded rapidly. And as a result, refiners’ margins have grown dramatically. In his column (subscription required) last week, Barron’s editor Alan Abelson posted a chart that showed the cracking spread spiking from about $10 per barrel in late August to above $40 per barrel in Katrina’s wake.

Like I tell my wife: it’s all about the cracking spread, baby. :lol:

They are certianly making us spread until we crack.

About time they made some money, that’s a crap business and has been high risk-low return for years.

Wrong again. It’s a very quiet, very profitable business.

Wrong again? I’m in the industry, I’ve been aware of this long before you read this article. You better read the article again, a little more carefully.

Huge integrated oil companies such as ExxonMobil have refining operations. But the independent refiners like Valero and Tesoro are relatively anonymous. Since they occupy a spot in the middle of the supply chain, they don’t have well-known consumer brands, and they don’t make news by hitting big strikes of crude. Instead, they’re involved in a tough, low-margin, and capital-intensive processing enterprise—turning crude oil into gasoline or heating oil. And it can be a difficult business. It takes a lot of money to build and operate a refinery, and communities don’t exactly welcome them with open arms.

Refineries are making big money now… not historically.

Valero started operating some gas stations around here. Wondered who they were.

Apparently, Exxon is making about $100 million profit per hour right now. Heard this on NPR last night.

More like they’re spreading our cracks.

Ok, I think we’re done.

I think someone missed a decimal place or two. That would be 2.4 billion profit/day and some crazy number like 800 billion/year.

Boy if that were the case their stock is pretty undervalued. Luckily that person is employed in radio and not being a stock analyst. He should keep his day job.

I’ll shed a tear for the historically poor independent refiners, then. But not now.

More like they’re spreading our cracks.
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Without using any lube…

Now, we’re done. :lol:

I think someone missed a decimal place or two. That would be 2.4 billion profit/day and some crazy number like 800 billion/year.

Boy if that were the case their stock is pretty undervalued. Luckily that person is employed in radio and not being a stock analyst. He should keep his day job.[/quote]
It was on FSRN. It seemed high, and I wish they had cited a source, but oh well. Although, they could have meant that number applied to the entire oil industry. I don’t know.

People complain about peak oil, then people complain about high prices which makes everyone conserve and generates the capital to invest in new energy sources. Make up your minds people.

The long-term price increase is inevitable. And so is short-term price gouging.

And idiots who want to start applying price controls, well, there’s no hope for them.

Who in this thread is advocating that?

Elected people in Hawaii and California.

As a quick followup to what was said on FSRN about Exxon, they’re actually making (only) 110 million per day. This is straight profit though, not revenue. It’s no 100mil/hr, but I think it’s still worth noting that this is 69% higher than profit reported from this quarter last year, not to mention the wonderful tax breaks they’re getting.

The reason? Prices are soaring because of perceived shortages while the cost of producing the gasoline is little changed.

http://business.bostonherald.com/businessNews/view.bg?articleid=101320

I’m really interested in your insight. What’s so horrible about price controls?

Christ, don’t get him started on one of his loony libertarian tears.