Released on December 5, 2007
(Next Release on December 12, 2007)

Too Much Money?
A country music song performed by Daryle Singletary includes the lyrics, “Too much fun, what’s that mean? It's like too much money, there’s no such thing.” However, with current high fuel prices, many American drivers may feel that refiners’ earnings are too high.

While everyone might have a different idea of what constitutes “too much money”, the most recent quarterly financial reports from the large U.S. refiners included in EIA’s Financial Reporting System (FRS) show that profits from domestic refining and marketing were 54 percent lower in the most recent quarter (Q307) than they were a year earlier (see “Financial News for Major Energy Companies, Third Quarter 2007”) despite higher motor gasoline prices this year. As shown in the figure below, net income and margins for large refiners were lower in the third quarter of 2007 than in the third quarter of 2005 and 2006. In fact, net income for this group of companies during the third quarter (in real terms, adjusted to Q307 dollars) was very similar to net income over the 2000 through 2004 period.

So, why are motor gasoline prices so high? Mostly because of high crude oil prices, from which many of these companies derive little or no benefit. U.S. production of crude oil and natural gas liquids by this group of companies for the third quarter of 2000 through 2007 has steadily declined from a high of 29 percent of their refinery throughput in 2001 to 18 percent of their refinery throughput in 2007. Thus, these refiners must either purchase crude oil from other U.S. producers, import crude oil that they produce abroad, or purchase crude oil produced abroad by others. And the higher crude oil prices rise, the more overall costs for these companies increase. Further, they can’t always pass along higher costs, as evidenced by the 37 percent decline in gross refining margins between the 2006 and 2007 third quarter data. This helps explain why U.S. refiners did not generate as much net income, even as gasoline prices were high.

Residential Heating Oil Prices See First Decrease Of The Season
Residential heating oil prices receded during the period ending December 3, 2007, breaking the streak of consecutive record highs set every week of the current winter fuels season. The average residential heating oil price dropped by 1.4 cents last week to reach 327.3 cents per gallon, a gain of 89.4 cents from this time last year. Wholesale heating oil prices fell 16.4 cents to land at 260.3 cents per gallon, which was an increase of 87.1 cents compared to the same period last year.

The average residential propane price gained another 1.1 cents, achieving the ninth consecutive weekly record, attaining 246.0 cents per gallon. This was an increase of 51.0 cents compared to the 195.0 cents per gallon average for this same time last year. Wholesale propane prices decreased by 6.1 cents per gallon, from 162.1 to 156.0 cents per gallon. This was an increase of 53.6 cents from the November 27, 2006 price of 102.4 cents per gallon.

Retail Prices Fall
The U.S. average retail price for regular gasoline fell for the third consecutive week, losing 3.6 cents to settle at 306.1 cents per gallon as of December 3, 2007, 76.4 cents above a year ago. All regions recorded a price decrease with the East Coast reduced by 1.9 cents to 307.3 cents per gallon. The largest drop occurred in the Midwest where the price fell 6.4 cents to 299.5 cents per gallon while the Gulf Coast was lower by 3.1 cents to 293.5 cents per gallon. A decrease of 0.9 cent in the Rocky Mountain region sent the price to 305.4 cents per gallon. Although 2.9 cents less than last week, the West Coast still was the highest regional price in the country at 327.6 cents per gallon. The average price for regular grade in California was 336.1 cents per gallon, down 3.7 cents from last week but 86.5 cents per gallon more than last year.

Retreating by 2.8 cents from last week but 79.8 cents more than last year, the retail diesel fuel price declined to 341.6 cents per gallon, still the third highest price ever recorded. Regional prices were down across the country as the East Coast decreased 0.9 cent to 344.4 cents per gallon. The Midwest fell to 338.5 cents per gallon, 3.8 cents under last week. The Gulf Coast lost 1.5 cents per gallon to 334.5 cents per gallon. The Rocky Mountain region price tumbled 4.0 cents to 348.7 cents per gallon. The West Coast recorded the largest decrease, plummeting 5.5 cents to hit 353.2 cents per gallon. California prices declined 5.3 cents to fall to 356.7 cents per gallon.

Propane Inventories Lower
Propane inventories posted seasonal declines last week, moving lower by 0.5 million barrels to a level of 61.0 million barrels as of November 30, 2007. Despite modest activity in both inventory gains and losses over the past several weeks, propane inventories continue to follow on a path at the lower boundary of the average range for this time of year. Regional inventories posted mixed results last week with losses being reported in both the East Coast and Midwest of 0.1 million barrels and 0.6 million barrels, respectively. While inventories in the Gulf Coast remained relatively unchanged, the combined Rocky Mountain/West Coast region posted the only gain for the week of 0.1 million barrels. Propylene non-fuel use fell by 0.1 million barrels while its share of total propane/propylene inched lower to 2.4 percent from the prior week’s share of 2.5 percent.

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