Price increase has been attributed to limited refining capacity, which has generated a sharp rise in refinery profits ... up to $39 per barrel [!]

United States Gasoline prices and the “free market”: Refiners profit after reducing capacity | By Joe Kay | May 31, 2007, 10:21

The recent sharp rise in US gasoline prices and the accompanying hardship for millions of people underscore once again the consequences of an energy market dominated by a few giant corporations. The price increase has been attributed to limited refining capacity, which has generated a sharp rise in refinery profits while facilitating market manipulation.

Gas prices in the US rose to record highs just in time for the Memorial Day weekend at the end of May, traditionally a time when many families drive long distances. Average gasoline prices reached $3.22 last week, approaching the record inflation-adjusted high of $3.29, set in 1981. In some parts of the country, prices rose considerably above that, with gasoline reaching as high as $3.69 a gallon in California.

The main beneficiaries of the surge in prices have been American refiners, which import crude oil and process it into gasoline and other products. Some of the major oil corporations, such as ExxonMobil and Chevron, are vertically integrated, combining oil extraction and refining operations. These companies have seen profitability of the refining portion of their business soar.

A Wall Street Journal article May 18 noted that refiners are pulling in more than $30 in profit before taxes and other expenses for every barrel of oil that they process, the most per barrel since the immediate aftermath of Hurricane Katrina in 2005. On the West Coast, where gasoline prices are higher than the national average, refinery profits are at $39 a barrel, more than double the average of $17 over the past five years, according to a March 9 report in the San Francisco Chronicle.

The large differential between the oil refinery revenues from the sale of gasoline and costs from the purchase of crude has been explained by shortages in refining capacity, which has reduced gasoline reserves as demand increases—leading to a rise in gas prices. All of the extra profit to the major refineries is coming directly out of the pockets of American consumers. ...
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The shortage of refining capacity is generally attributed in the media to a number of planned and unplanned refinery outages. However, refinery capacity has been deliberately decreased over the course of the past two decades, for the explicit purpose of boosting profit margins.
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