KANSAS CITY, Mo. - The conventional wisdom has been that gasoline shot to about $4 a gallon because the price of oil soared.
But oil refinery profits also have doubled, making that another big reason people are paying more at the pump.
Refineries are on track to reap their best profits in years. Even though U.S. gasoline use is declining, refiners have kept U.S. stockpiles below average by curbing production and exporting more gasoline.
"It's a good day to own a refinery," said Steve Mosby, vice president of Admo Energy, a fuel supply consulting company for fuel retailers.
For refineries, their margin is the difference between what they pay for crude oil and what they get for the wholesale gasoline and other products. Those margins have been gradually rising this year and recently were more than double what they were a year ago, when they were 38 cents for a gallon of gasoline.
Last week, the margins climbed more because of concerns that Mississippi River flooding could close some refineries and tighten supplies further.
At one point last week, the margins for wholesale gasoline sold in the Midwest were more than $1.20 a gallon, rivaling levels briefly seen after Hurricane Katrina in 2005.
Rising refinery profits have offset some of the recent drop in oil prices, keeping gasoline prices relatively high, although some relief could still filter through to retail fuel pumps. The idea that refinery profits are keeping gasoline prices from falling lower could add fire to recent criticism over oil-company profits.
John Felmy, an economist for the American Petroleum Institute trade group, said refineries were struggling a year ago, and the increases in margins this year resulted from supply and demand, and reaction to the Mississippi flooding.
But Tyson Slocum, director of the energy program at Public Citizen, a public interest group, saw the higher margins differently.
"It's good news if you're a shareholder of a major oil company but not if you're a motorist," he said.
The Energy Information Administration last week said demand for gasoline had fallen 2.9 percent in the last month, while the country's refineries were using only 81.7 percent of their capacity. That meant they were processing 900,000 fewer barrels a day of gasoline than a year ago.
Refineries also are exporting more gasoline, especially to Mexico and Latin America.
So even though crude oil stockpiles are above average, and oil prices have come down recently, U.S. gasoline inventories remain below average. And that could help keep pump prices from fully reflecting the recent decline in crude oil.
