The Wall Street Journal reports that Valero Energy (NYSE: VLO), the U.S.'s largest oil refiner, experienced a 77% plunge in earnings in the first quarter. The market is happy with the result. How so? Analysts expected Valero to make 29 cents a share and Valero exceeded that by 66% -- earning 48 cents a share. The stock is up 1.2% in early trading.

Poor Valero. The costs it pays for the crude it refines are growing faster than the prices it can charge consumers due to what it says is weak demand. Firms like Valero that don't have crude oil-producing operations are expected to fare poorly due to their inability to raise gasoline prices even more. Valero, also one of the largest U.S. gas retailers, cited weak margins, with its Gulf Coast gasoline margin down 59% from a year earlier. Margins also fell on secondary products such as asphalt and fuel oil.

How will Valero relieve its suffering? It's planning to reduce the output of its West Coast refineries so it can raise gasoline prices more. Valero has said it is considering an overhaul of its refineries that could result in the sale of one or more facilities. Valero hopes any move would make it a more efficient refiner in a time of high and volatile oil prices and rising global competition.

Got that? Valero is suffering because gasoline prices are not high enough. Are you happy now?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Valero securities.