|SLast, margins also increased in 2004. This graph shows a surrogate for refiners
gross margin. It simply measures what
price refiners received for gasoline and distillate fuels compared to the
price they paid for crude oil.
|SDuring the 1990’s refining was not a
particularly good business in which to invest. Actual financial margins and returns were
|–Many large integrated companies reduced their
refining assets, choosing to be net purchasers of product and putting their
investment dollars in places where they could earn a higher return.
|–Some independent refiners (those without upstream assets),
however, chose to grow, both by purchasing assets from integrated companies
and expanding capacity in their existing facilities.
|SSince 2000, the petroleum market has
tightened, and with the exception of 2002, returns were better than in the
1990’s. This is leading some
refiners to see a better financial future than previously.
|SHowever, there is much uncertainty about
the future. As this graph illustrates,
the increase in spreads came as a result of price volatility rather than