REFINERY ECONOMICS

There isn't a market incentive to build more refineries because supply shortages increase profits. Although there may be some disincentive caused by environmental considerations, the primary reason we don't have more refineries is the profit-motive.

High prices bolster energy cos. profits
By STEVE QUINN Associated Press Writer
Oct 18, 2:27 PM EDT

Although hurricanes Katrina and Rita created compounding headaches for energy companies over the summer, the storms ultimately benefited them because, as supplies tightened, prices for gasoline, diesel and jet-fuel soared.

There is less room for error in the U.S. energy market these days thanks to the reduction of fuel inventories and slow addition of new refining capacity - trends that have helped make refining much more profitable in recent years.

Meanwhile, watch for refiners and independent producers to weigh in with their own stout performances, say analysts.

Refiners such as Valero Energy Corp., Tesoro Corp. and Frontier Oil Corp., are expected to show huge profit gains. Analysts forecast these three companies earned a combined $1.37 billion for the third quarter, a 162 percent jump from last year, according to Thomson Financial.