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I have been hammered here, and rightly so, for supporting the idea of future refinery profits in the face of facilities closing and oil producers doing extremely well.

Oil prices remain high, so all kinds of production techniques from fracking to mining tar sands becomes highly profitable, if oil and not gas is what you're looking for. If you're looking for natural gas, on the other hand, you have trouble, and Lou Basenese has some great ways to play the downturn.

Our refining and transport infrastructure, unfortunately, isn't prepared for these wild swings, and scarce resources are usually rationed by price.

Analyst Tom Whipple says the northeast could see gas spike to $5/gallon this summer because of a shortage of refining capacity. Citi analyst Seth Kleinman agrees and says going long gasoline (UGA) and short oil (OILZ) may be the best trade you can make right now.

Traders are waking up to the fact, and policymakers soon will also wake up to the fact, that oil, gas, and natural gas are not as fungible as they may seem. While drillers push on for oil in all its forms, they're increasing the amount of natural gas they flare, or burn off, because they can't get it to market profitably.

With unemployment falling and the incumbent party's popularity rising, investors need to expect some political pushback on this. Expect more tough talk defending green subsidies even as natural gas prices stay low.

The easiest play thus becomes energy infrastructure - better refineries, more pipelines to bring various products to market (despite the political debacle of Keystone) and LNG terminals ready to ship gas out to places with higher prices and more unreliable supplies, like Europe.

Supporting this infrastructure and pointing out the stupidity of flaring are good for the Administration both politically and economically, especially as some renewable energy companies begin to see a future where they can live without subsidies, taking them out of the line of political fire.

Who benefits? It hurts for a Democrat to admit this, but the biggest beneficiary of the current environment may prove to be Halliburton (HAL). Whatever needs to be built in the line of oil, gas, refining, and transportation infrastructure, that's their business. You might also expect a pop for refiners and marketers like Valero (VLO) and Marathon Petroleum (MPC).


Source: Oil Refinery Vs. Production Bet Subject To Change