Refinery Margins Continue Upward Movement

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Oil companies are gaining improved earnings from producing crude oil and also processing crude oil into fuels. The run-up in crude oil and gasoline prices since 2002 have been front-page news, and even more so since Hurricane Katrina hit the Gulf Coast Region, where much of the U.S. crude oil infrastructure and refineries are located.

Click on the image at right to view a table analyzing the difference between crude oil and gasoline prices. This data is taken from closing prices on the New York Mercantile Exchanges.

Examining the numbers in the attached table, it can be seen that the difference in price between crude and gasoline is now at its highest since August 2004. These background figures are an approximate indicator of the profitability of refinery operations because gasoline is the main fuel made at refineries. But that’s only part of the picture, crude oil prices have increased by $50 per barrel, a whopping 360% increase since January 2002, from $19 per barrel to a high of $69.5 after Katrina.

Why the continual upward movement? In December 2002, Venezuelan oil workers began a strike, which essentially shut down oil production and refining capacity in that country for several months. This severely impacted U.S. refineries located on the Gulf Coast of Mexico, which refine the crude oil from Venezuela. The effects of the strike are reflected in the January 2003 jump in crude oil prices. Crude oil prices leveled out during 2003-2004 to around the lower $30’s per barrel, but storms like hurricane Ivan and Charley in the summer of 2004 shot prices up to the mid $40’s per barrel. There were also a good number of unplanned refinery shut downs during this time due to power outages and other forced events.

Fear of crude oil shortages and global demand has not let up and prices have continued to increase past the $50 and $60 per barrel benchmarks to today’s high prices after the hurricane Katrina disaster.

In further refinery news, as of September 2, 2005, Valero Energy became the largest U.S. oil refinery by its purchase of Premcor. Premcor owns four refineries, bringing Valero’s total number of refineries to eighteen. Valero has surpassed the refining capacity of Conoco-Phillips (previously the largest refiner).

Industrialinfo.com maintains a database of information on U.S. refineries, including a complete list of capital projects and turnarounds and listings of locations and operating personnel. Check out Industrialinfo.com’s Refinery Tracker or contact Member Center at 1-800-762-3361 for details.

Click on the image at right and check out Industrialinfo.com’s 2005 Refinery Wall Map.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.