So refiners' costs went up the minute news of Iraq's invasion flashed around the world-even though the oil they were receiving had been pumped weeks earlier. To completely cover these increases, oil companies would have had to raise prices 25 cents per gallon. But competition and consumer resistance have kept most increases well below this. The clearest winners are those who explore for and produce crude. Their costs don't rise and they are profiting from the sudden drop in overall output.
Refiners are a more complex case.
They profit most on the rare occasion when the cost of crude is declining and prices of refined products are soaring because of tight supply. They're squeezed now because competition keeps prices of refined products from rising as much as crude oil has. But when crude prices turned back up, these margins shank swiftly. If prices stabilize, refiners' profits should fatten again. The integrated companies that produce oil, refine it, and retain the products will on balance come out ahead.