Sour crude oil sweetens profits for refineries

Washington Times ^ | Monday, March 14, 2005 | By Brad Foss

[JohnHuang2]

ASSOCIATED PRESS

Like bartenders putting cheap alcohol into their cocktails, some U.S. refiners are reaping huge profits by using lower quality crude oil to make everything from gasoline to diesel. The difference is that, unlike martinis mixed with barnyard booze, these finished fuels, after a little extra work, are the same quality as those made with top-shelf ingredients and therefore fetch the same high price from consumers. But the initial cost per barrel is $7 to $17 cheaper. Despite the extra costs associated with processing lower quality crude, the profit margins of independent refiners able to handle it are up sharply. Valero reported net income in 2004 of $1.8 billion, nearly three times its results a year earlier, while Premcor Inc.'s profits tripled to $478 million.