The Board of Directors of Valero Energy Corporation (NYSE:VLO) has approved an increase in the company’s regular quarterly cash dividend on common stock from $0.06 per share to $0.08 per share, effective with the quarterly dividend the Board has declared to be payable on June 14, 2006 to holders of record at the close of business on May 17, 2006.  The increase in the dividend brings the annualized dividend rate on the company's common stock to $0.32 per common share.

“This dividend increase represents a 33 percent increase in our dividend and reflects our confidence in the longer-term earnings outlook for Valero,” said Bill Klesse, Valero’s Chief Executive Officer.   “We continue to experience outstanding refining margins and sour crude discounts throughout our system.  Given the positive industry fundamentals, we began 2006 with an outstanding first quarter and we expect that 2006 earnings will be a record.  Going forward, we firmly believe that Valero is well positioned to continue to provide exceptional returns for our investors.”

The Board of Directors of Valero Energy Corporation has also declared a regular quarterly cash dividend on the company’s 2% Mandatory Convertible Preferred Stock of $0.125 per share.  The dividend is payable June 30, 2006 to holders of record at the close of business June 29, 2006.

Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and annual revenue of more than $80 billion. The company owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,000 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. Please visit www.valero.com for more information.

Statements contained in this press release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.  The words “believe,” “expect,” “should,” “estimates,” and other similar expressions identify forward-looking statements.  It is important to note that the company’s actual results could differ materially from those projected in its forward-looking statements.  For more information concerning factors that could cause actual results to differ from those expressed or forecast, see the company’s annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and available on the company’s website at http://www.valero.com.  These factors include potential changes in gasoline, crude oil, distillate and other commodity prices, varying market conditions, actions of government, hostilities in oil producing regions, adverse rulings in litigation and potential delays or other changes in work and repair schedules.  The company undertakes no obligation to update or publicly release the result of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur or which the company becomes aware of after the date of this release, or to reflect the occurrence of unanticipated events.