Margins for refined products declined as the cost of crude oil and other feedstocks increased more rapidly than the prices of gasoline and other products, such as asphalt, fuel oils, petroleum coke, and petrochemical feedstocks. For example, benchmark Gulf Coast gasoline margins decreased about $22 per barrel, or 77 percent, from $28.95 per barrel in the second quarter of 2007 to $6.60 per barrel in the second quarter of 2008. Somewhat offsetting these weaker margins were significantly higher margins on distillate products such as diesel and jet fuels, which continued to experience strong global demand, and improved differentials for sour crude oil.
Refinery operating expenses increased by $148 million, primarily due to higher energy costs for electricity and natural gas.
"Despite the difficult environment for margins on gasoline and many secondary products, Valero continued to be profitable," said Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer. "Wide differentials for the heavy and sour feedstocks that we can process in our refineries benefited us significantly in the second quarter.
"In our refining operations, we've made great progress in shifting production to take advantage of the strong market for distillates"
"As I've said before, the refining industry historically has been seasonal, volatile, and cyclical."