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Can the "Downstream" Rescue American Oil Companies?

Major American oil companies, almost by definition, refine and sell more oil (e.g. through gas stations), than they produce. Arab and certain state-owned European companies produce more than they refine, but stateside, this is true only for smaller exploration oriented companies.

Taken as a whole, the oil industry makes less money when oil prices are low than when they are high. But low oil prices make it easier to sell gasoline at high margins. So if an Exxon Mobil, or a Chevron sells two or three times as much oil in the form of gasoline as it produces (and makes up the difference in "cheap" purchases), wider margins "downstream" (at the gas pump) compensate, or more, for lower realizations "upstream" (at the wellhead).

Kurt Wulff has mentioned that a particular beneficiary of this trend is British Petroleum, (NYSE:BP), which bought the former Sohio, Amoco, and Arco stateside. Another company that stands to benefit is Conoco Phillips (NYSE:COP).

Full Disclosure: Long BP, COP