From Deseret News archives:

Oil processors reap windfalls

Published: Sunday, Oct. 22, 2006 2:38 a.m. MDT
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While crude oil prices may be set on a national and international stage, Jurrius said Utah refineries pay a lot less for the crude they process.

"No, they don't pay the price that is internationally set," Jurrius said. "They price based on what they can negotiate for." One refinery was paying $12.90 less last week for crude than the price posted by the national stock exchange.

In some instances, Jurrius said, Utah refiners have paid nearly $25 per barrel less for Canadian crude oil compared to the NYMEX commodity quotes.

"We hear consumers talking about why gas prices are higher than the national average," Jurrius said. "We're asking why they are higher when the commodity is considerably lower than the national price." The raw materials are costing less, but they are selling at a higher rate.

And millions are being made, he said.

Multiply that $12.90 by 17,000 barrels of black wax, and someone is profiting by $220,000 a day, Jurrius said. Over one year, that amount skyrockets.

"That's $80 million of value that somebody put in their pocket," Jurrius said.

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Francine Giani, executive director of the Utah Department of Commerce, headed a recent gas-price investigation ordered by Gov. Jon Huntsman Jr. She believes that Utah's refineries are making much more profit than Utah gasoline retailers.

"I think the refineries are partying," Giani said. "The refineries would not tell us what they are paying for crude. That's the secret of the day."

Black wax crude does require additional processing, Jurrius said, but historically the oil has seen only a $2 to $3 differential compared to NYMEX prices. Now, it appears, Canadian crude is crowding out Utah's black wax oil.

So why are Utah's gasoline prices so high if Utah refineries are buying crude at bargain prices?

"The reason they can do it is that all of these numbers are so secretive," Giani said. "They essentially said, 'Kiss off.' We knew we weren't going to get the information because we didn't issue a criminal subpoena. They don't want consumers to know exactly how much they are making. Are we getting gouged? The answer is still yes."

On Friday, Utah gasoline prices averaged $2.49, according to AAA — 27 cents higher than the national average of $2.22.


Contributing: Lucinda Dillon Kinkead

E-mail: danderton@desnews.com

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