As Marathon Petroleum Corp. posted a three-fold increase in profits Thursday, buoyed by crude prices that plunged faster than refined products, the company warned that recent moves to lift a decades-old ban on crude oil exports threaten refiners.
CEO Gary R. Heminger said those who want to change U.S. policy to allow the export of crude based their support on flawed assumptions that refiners can’t process the glut of light oil unleashed by a domestic drilling renaissance.
“We are in the market buying $5 billion of crude oil every month and we do not see a glut of light, sweet crude,” he said in a call with investors Thursday morning. “In fact, there have been times during the year when producers could not deliver the volumes they committed to sell us.”
The industry is making significant investments to retrofit, upgrade and expand refineries, condensate splitters and other facilities to process more domestic oil. But Marathon Petroleum estimates that the amount of oil needed by these proposed projects adds up to more capacity than the shale boom will be able to deliver, Heminger said.
Heminger weighed in as the debate ramps up between free-market economists and independent oil companies who have recently launched initiatives to persuade lawmakers to lift the 39-year-old ban on selling crude overseas and refiners, who have urged policymakers to maintain the ban.
Related: New crude export campaign launches
Supporters have argued that unleashing U.S. oil on the global market could boost its price and prevent U.S. production from exceeding domestic refining capacity, which would lead to further slides in the oil price and potentially affect drilling production. Refiners have said they are equipped and ready to accept all U.S. oil.
“For decades, energy policy has been focused on energy security for our country,” Heminger said Thursday in the call. “That vision can be a reality, but it can only be achieved with a vibrant refining industry to process the light crude oil we produce in this country into usable products. For that to happen, refiners need certainty.”
The recent slide in oil prices – created in part a growing supply of oil from North America – is helping boost refiners’ margins.
Marathon Petroleum Corp. on Thursday posted earnings of $672 million, or $2.36 per share, during the three-month period ending Sept. 30. That’s up from $168 million, or 54 cents per share, during the same period last year. Phillips 66 said Wednesday its profits had doubled.
Related: Phillips 66 reports sunny quarter, but clouds loom
The Ohio-based refining and pipeline company attributed the increase to a widening price spread between crude and refined products, and a record quarter for its convenience store segment.
The company’s refining and marketing sector swelled to $971 million in the third quarter from $227 million last year as Marathon secured better prices on the refined products it sold into the market and capitalized on crude prices that plunged faster than gasoline and diesel prices.
That gain was partially offset by higher turnaround costs and other operating expenses, the company said.
The company’s retail subsidiary, Speedway, saw its net income climb from $102 million to a record high of $119 million, thanks to better margins on gasoline, diesel and merchandise.
That gain was partially offset by higher operating expenses as Speedway began to operate more stores.
The company continues to invest in the retail segment. On the last day of the third quarter, Speedway closed on a $2.8 billion deal to acquire all of Hess’ retail locations, nearly doubling the company’s Speedway’s retail operations. The deal also included Hess’ transport operations and shipper history, including 40,000 barrels per day on the Colonial Pipeline.
Related: Hess profits increase 140 percent amid asset sale
Speedway now owns and operates 2,740 stores in 22 states.
That acquisition will help Marathon Petroleum serve new customers and expand its midstream business, the company said.
Marathon Petroleum’s shares rose $3.24 to close at $90.65 on the New York Stock Exchange on Thursday.
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