Valero ( VLO) reported Tuesday that weak refinery margins sent its fourth quarter earnings tumbling 48% compared with the same period last year. The San Antonio-based refiner earned $567 million, or $1.02 a share, in the quarter, down from $1.1 billion, or $1.74 a share, a year earlier. Although its results for the fourth quarter of 2007 were sharply lower than those last year ago, the company still beat the analyst consensus of 64 cents a share, as measured in a poll by Thomson Financial. Quarterly revenue climbed to $28.7 billion from $18.8 billion a year ago. Operating income in the fourth quarter was $884 million, compared to $1.4 billion in 2006. In a press release, Valero stated that the decline in operating profit occurred because the prices of refined products like motor gasoline did not keep up with the cost of crude oil and other feedstocks. Refinery throughput volumes were 1.55 million barrels a day, up from 1.50 million barrels a day in the fourth quarter of 2006. However, throughput margins were $9.91 a barrel, down from $11.53 a year ago. "We reported good results for the fourth quarter considering the dramatic increase in feedstock costs relative to product prices," CEO Bill Kleese said in a prepared statement. Refinery operating expenses climbed by $123 million due to higher maintenance and energy costs, contributing to the decline in operating income. Also responsible were miscellaneous problems at some Valero refineries, including a recent fire at its Aruba refinery. Looking forward, Kleese said that "for gasoline markets, we expect a repeat of the normal seasonal pattern in which supplies fall, demand grows and margins rise as we head toward the summer driving season." He also expects diesel margins to remain strong due to limited inventories of the product. However, he warned that "margins for some of our secondary products, such as asphalt, fuel oils and petrochemical feedstocks, are still weak and will affect benchmark margin realization." Klesse also said that Valero's margins would likely be hurt if the U.S. economy were to enter a recession, as some economists have suggested. Shares of Valero were recently trading 11% higher at $60.99.