Asset Plays Investing

The Biodiesel Tide Is Going Out: Neste Oil Is Swimming Naked, 75% Downside

Neste Oil (OTC:NTOIF) currently benefits from the Renewable Fuel Standards in its biodiesel refining business. As the EPA proposals for lower blending mandates are implemented, Neste Oil's earnings will decrease sharply. A lucky refiner remains a refiner: sell Neste Oil for 75% downside.

Refining background

Neste Oil is a European refiner. European gasoline and diesel demand has been in steady decline for 10 years due to rising energy efficiency. Cars drive more miles per gallon year after year. That trend is certain to continue independently of the economic outlook. As a result, the European refining industry alternates periods of poor and very poor profitability. Periods of very poor profitability last until refiners throw the towel and shut a...

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