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R.I. gas prices up for 4th week

BLOOMBERG NEWS FILE PHOTO ANDREW HARRER
GAS prices in Rhode Island increased for the fourth consecutive week, AAA Southern New England reported Monday.
Posted 1/23/12

PROVIDENCE – Gas prices in Rhode Island increased for the fourth consecutive week, AAA Southern New England reported Monday.

The auto club’s Jan. 23 survey revealed a 2 cent increase from a week earlier and a 15 cent increase over the last month.

The average price of regular, unleaded gasoline in the Ocean State was $3.51 per gallon; in Massachusetts, also up 2 cents, it was $3.43; and nationally, it stood at $3.39.

Last year, at Rhode Island pumps, the price was 31 cents lower than Monday. Gas prices ranged from $3.46 to $3.60 on Jan. 23.

According to Bloomberg News, U.S. refiners may have lost as much as $700 million in the fourth quarter as a surge in crude prices turned energy contracts that were profitable through most of 2011 into money-losers.

A fourth-quarter profit squeeze became more pronounced for Tesoro Corp., Marathon Petroleum Corp. and Valero Energy Corp. because of a risk-management strategy they used to purchase oil to feed their refineries. The effects of a lower profit margin for refiners will continue to be felt through the year, analysts from Deutsche Bank AG, Macquarie Group Ltd, and Global Hunter Securities LLC said, as they downgraded their ratings on refiners and forecast lower profits for 2012.

A 4.9 percent decline in oil prices from a high this month of $103.22 has provided some relief for refiners, although analysts project per-share profit for Valero, Tesoro and Marathon Petroleum to decline 6 percent or higher compared to 2011, according to average estimates compiled by Bloomberg.

The companies bought crude linked to global prices and used U.S. oil futures contracts to protect against price swings. When U.S. and global prices took a surprise turn, refiners lost millions on the contracts, said Cory Garcia, an analyst with Raymond James and Associates Inc. in Houston.

Energy contracts that lock in the price of crude cost Marathon as much as $350 million, Valero $200 million and Tesoro $150 million, Jeff Dietert, an analyst at Simmons & Co. International Ltd., wrote Jan. 9 in a note to investors.

“All the refiners got beat up this quarter and will post losses because of this,” Garcia said in a telephone interview.

Marathon spokeswoman Angelia Graves declined to comment on the company’s hedging strategy. Valero spokesman Bill Day and Tesoro spokeswoman Tina Barbee also declined to comment.

Earnings cut

Valero said Jan. 16 that falling prices for gasoline combined with changing crude prices, cut earnings to less than 10 cents a share. Tesoro said Jan. 5 that it lost between $77 million and $112 million in the quarter, and Marathon Petroleum said Jan. 10 it would report a “small loss.” A “break-even” fourth quarter in refining for Chevron Corp. led the integrated oil and natural-gas company to announce Jan. 11 that its earnings would be “significantly below” the July-to-August period.

Losses stemming from the practice known as hedging worsened a quarter in which refiners saw profit margins from processing oil into fuel fall 39 percent, according to data compiled by Bloomberg.

At service stations in Rhode Island this week, the survey found average self-serve prices of $3.65 per gallon for midgrade unleaded, $3.77 for premium unleaded gasoline and $3.98 for diesel.

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