Valero (VLO), the second largest U.S. crude oil refiner, plans to run its refineries at 95% of combined total production capacity during the fourth quarter.
The refiner will produce 3.2 million barrels per day (bpd) despite the tight supply for motor fuels, said Valero Chief Executive Joe Gorder on Tuesday during a conference call to discuss third-quarter results.
Lower refinery capacity impacts the supply of gasoline and can push prices higher even when crude oil prices fall.
The most common gasoline price is "in nearly a three-way tie between $3.49, $3.39 and $3.29... with $3.29 taking over by the weekend," Patrick De Haan, head of petroleum analysis, GasBuddy, a Boston-based provider of retail fuel pricing information and data.
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Gasoline Prices and the Economy
The price of gasoline influences consumers and their outlook on the future of the economy, he said.
"Gas prices dictate the way many Americans feel about the economy," De Haan tweeted. "Those LEDs with four digits constantly are burned into memory."
Valero, which operates seven U.S. Gulf Coast refineries, plans to produce 1.78 million barrels of oil daily or up to 95% capacity during the fourth quarter from those refineries.
During the third quarter, Valero's refineries were able to operate at 95% or 3 million barrels of oil daily.
"Refining margins remain supported by strong product demand, low product inventories and continued energy cost advantages for U.S. refineries compared to global competitors," Gorder said in the call with Wall Street analysts.
The CEO said he and other oil executives met with U.S. Energy Secretary Jennifer Granholm at the White House recently.
Gorder said Valero has no plans to restart 1 million barrels of oil daily of refining capacity that has been shuttered since 2019 in response to a question from Granholm. "I think the general sentiment was that wasn't going to happen," he said.*
Valero said its two refineries in California will run up to 89% of their combined capacity or 270,000 bpd. The company is completing a scheduled overhaul at its 145,000 bpd San Francisco-area refinery in Benicia, California.
At its three mid-continent refineries, Valero plans to operate up to 99% of combined capacity, or 480,000 bpd and its two north Atlantic refineries are expected to produce up to 91%, or 460,000 bpd, of combined throughput in the fourth quarter. Gorder said Valero is not interested in purchasing any refineries.
"We're not going to jump into the market for any kind of significant transaction," he said.
Refinery Issues Over the Summer
Refiners were plagued with various issues during the summer months, including fires and routine maintenance that occurred during a short period of time, leading to lower supply and had caused prices to "spike" despite oil prices falling, said De Haan.
BP's Whiting refinery in Indiana, which produces up to 435,000 barrels of crude oil daily and provides gasoline to seven states in the Midwest, went offline in August after a fire damaged several units.
BP's Husky refinery in Toledo, Ohio, was shut down after a fire that killed two people.
Refineries in Los Angeles were also forced to close for unplanned work.
Other refineries along the West Coast conducted scheduled maintenance, including Phillips 66 and Valero who took their Anacortes, Wash., and Benicia, Calif., refineries offline for scheduled maintenance.
