San Antonio’s largest public company, Valero Energy Corp., paid an estimated $579 million in “excess energy costs” during the February winter storm that incapacitated much of the electric grid.
Valero said energy costs driven by sky-high natural gas and electricity prices were responsible for the lion’s share of the energy giant’s $704 million loss it posted for the end of the first quarter of 2021, an improvement over the $1.9 billion loss it posted for the first quarter last year. Valero is the world’s largest independent petroleum refiner, operating 15 refineries, mostly in North America, and marketing transportation fuels.
Wholesale market prices for electricity jumped 7,400% during the peak of the February storm from the month before, as supply choked while demand skyrocketed.
“The higher energy costs were driven by an increase in the prices of natural gas and electricity that significantly exceeded rates that we consider normal, such as the average rates we incurred the month preceding the storm,” Valero said in its filing with the U.S. Securities and Exchanges Commission.
Adding to the losses, Valero was forced to cut production as refineries froze during the storm. The peak of the storm prompted refiners across the industry to shut down as much as three-quarters of refining capacity along the Gulf Coast, according to S&P Global Platts.
Joe Gorder, Valero’s CEO, said in an earnings call last Thursday that “although our refineries and plants in those regions were also impacted, they did not suffer any significant mechanical damage and were restarted within a short period after the storm.”
For motorists, the average price at gas pumps across the city climbed steeply in the weeks after the storm, from roughly $2.10 just the day before to $2.54 four weeks later. Average prices have since settled to around $2.40.
As production has stabilized again, demand may continue to rise. Gorder told investors in the same call that demand for gasoline is up to 93% of its pre-pandemic levels.
“As we head into summer, we believe that there’s a pent-up desire among much of the population to travel and take vacations, which should drive incremental demand for transportation fuels,” he said.
Disclosure: Valero is a San Antonio Report business member.