Pump prices rising with swelling refinery profits

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Ventura County Star (California)

SAN FRANCISCO, CA — California refinery profits have more than doubled since last fall, one factor fueling both rising gasoline prices and record oil company profits.

Refinery profit margins now stand at $39 per barrel on the West Coast, more than double their average of $17 for the last five years, according to one rough measurement cited Friday by the San Francisco Chronicle.

Refineries don’t release precise profit figures. The newspaper measured the difference between the cost of the crude oil that refineries use and the price they charge for their finished products.

A limited number of refineries make California’s gas. Those refineries belong to a handful of companies. Chevron Corp., for example, controls roughly one quarter of the gasoline refining within the state. Chevron recorded 2006 earnings of $17.14 billion, its largest ever, boosted in part by refinery operations.

Gasoline prices have jumped above $3 a gallon for regular grade in some parts of California. The most expensive gas in the mainland United States is San Francisco, where a gallon averages $3.10, a jump of about 34 cents from a month ago.

The refineries that make California’s unique, pollution-fighting blend of gas have pumped out 7.8 percent less gasoline since the start of February than they did in the same period last year. That smaller supply brings higher retail prices.

Many analysts have attributed the rising pump prices to seasonal maintenance at the refineries, which typically begins in February, when California switches from winter to summer fuel blends.

Consumer advocates say the oil companies are intentionally limiting gasoline supplies to drive up prices and profit margins.

“What this industry needs to make big profits and what consumers need to have reasonable prices are very different things,” said Judy Dugan, research director for the Foundation for Taxpayer and Consumer Rights.

Oil industry representatives say they are not holding back supplies. The refineries must continue to pay their workers and sometimes hire extra maintenance personnel when glitches or maintenance-related slowdowns in production occur, they say.

“All the overhead still stays,” said Joe Sparano, president of the Western States Petroleum Association. “It is not a good condition to be shut down.”

Former California Attorney General Bill Lockyer subpoenaed financial documents from the state’s refiners last year after a sharp profit spike last spring. His successor, Jerry Brown, said the case remains open.

Figuring out real answers is practically impossible, said Severin Borenstein, director of the University of California Energy Institute. All the maintenance delays and production problems could be real, he said. Or refineries could be doing little things, bit by bit, to limit California’s gasoline supply, he said.

“If somebody told them, `Use your market power,’ this is how they’d do it,” Borenstein said.

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