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SAN ANTONIO -- Valero Energy Corp., petroleum refiner and marketer, issued an update on its performance earlier this week, stating that its first quarter earnings will be sharply lower than last year due to weak profits from gasoline production and unplanned outages at its refineries, Reuters reported.
Gas refining margins in the U.S. have been much less than 2007, as refiners are unable to pass soaring crude oil prices onto customers, especially so in the West Coast and Midwest regions, the report stated.
In addition, Valero's margins would also be significantly lower for petroleum coke, residual fuel oil and petrochemicals, according to the report. Unplanned outages at Valero facilities, specifically its Port Arthur, Aruba and Delaware City refineries, also would reduce profits by approximately $400 million, according to the report.
As a result, the company expects net income for the first quarter of 2008 to range between 10 and 35 cents a share, compared to earnings of $1.86 a share in the year ago period, Reuters reported.
Oppenheimer analyst Fadel Gheit told Reuters weak earnings could be expected across the sector.
"The $40 or $50 increase in oil prices from a year ago -- there's no way for refiners to push that at the pump," he said.
Refiners are banking on the summer driving season, "which barring a miracle is going to be a bust -- because the economy is weak, consumer confidence is low, oil prices are high, and people are afraid of losing their jobs," he told Reuters. "People will definitely curtail their discretionary driving. That's a typical consumer reaction."