Valero benefits from oil price drop

Last year, as the Big Oils were reporting big profits, refiners were struggling with high feedstock prices and dropping demand for their end products at the pump.

How times have changed: oil company profits are down while earnings at Valero, the US’ biggest refiner, have risen sharply.

Valero’s first quarter net income of $309m, or 59 cents per share, was up from $261m, or 48 cents per share, in the 2008 quarter.

The reason is higher margins on gasoline and secondary products, such as fuel oil, asphalt, and petroleum coke. Valero also noted the decline in refining operating expenses due primarily to lower energy costs.

Are things going to continue improving? Valero certainly hopes so. It has entered the ethanol business by agreeing to buy seven ethanol plants from VeraSun. It closed on six of the plants in April and expects to close on the last plant soon. With ethanol demand set to grow under the federal mandate, Valero hopes to cash in on its new business, as well as the upturn in demand as the economy improves.

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