Bill Greehey, chairman and chief executive of leading U.S. refiner Valero Energy Corp., said on Thursday he expects retail gasoline prices to hover between $2.00 and $2.25 a gallon in 2006.
“I think gasoline prices will range from $2.00 to $2.25 next year, barring 30 percent of the refining capacity being lost in a hurricane,” Greehey told Reuters.
On Thursday, the American Automobile Association said the average U.S. price for a gallon of gasoline was $2.136 per gallon.
Valero, which expanded to be the largest U.S. refiner through purchases of existing plants, will continue to look for refineries to buy, but will also expand the refineries it owns, Greehey said.
“We’re looking at internal expansion of our existing refineries, but we’re continuing to look at acquisitions,” he said. “We’re not at liberty to talk about which ones we’re looking at. The strategy is unchanged. We’ll continue to look at refineries to buy, and we’ll continue to upgrade our existing refineries.”
Based on the $8-billion price Valero paid this year to buy rival Premcor Inc. and its four refineries, Greehey said acquisitions will be more costly.
“Acquisitions are going to be more expensive, but the outlook for refining is much better than it’s ever been before,” he said.
Valero plans to add about 400,000 barrels of daily crude processing capacity at its 18 refineries over the next five years, Greehey said.
“We do have plans to spend $5 billion over the next five years, and increase our capacity by about 400,000 barrels a day,” he said. “If you look at what we’ve done since 1987, buying all these refineries and expanding them, we have increased capacity by about 400,000 barrels a day.”
Greehey continues to see a bright year ahead for refiners.
“I think as soon as you get some cold weather, you’re going to see distillate margins really improve.” he said. “Gasoline inventories are low, so the fundamentals for next year are really setting up well for gasoline, so I think next year is going to be a better year than this year.”