Gigem77

Did Big Oil Take Advantage of Light, Sweet Crude?

Refiners over the last year have faced lower crack spreads causing greatly diminished earnings. They have also dealt with increased regulatory burden. They were confronted by much stricter requirements for ultra low sulfur diesel. The use of ethanol as a blending component has been very costly since it cannot be stored indefinitely like gasoline nor transported via existing pipelines.

Look at the charts of their share prices and at the earnings for FTO, VLO or TSO. Refiners have been unattractive investments. Why is the CEO of VLO selling refinery units? Why is XOM selling all of their retail gasoline outlets?

Read the balance sheets of any integrated oil company and see which part of the business generated the most profit. Over the past 18 months, it has been the exploration and production segment, followed by the chemical division and lastly the refining segment. The refining profits have been on the order of 10-15 cents per gallon.

Speculators can buy gasoline contracts . They bid up the price just like they do with oil.

Study the energy business, Ken.