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1. Valero Makes a Permanent Shutdown
By Sham Gad
8:25 a.m. EST
Refiner Valero (VLO) has decided to permanently shut down a refinery in Delaware, eliminating 550 jobs. So far, refiners like Valero and Tesoro (TSO) have been idling plants and capacity until the market improves. As a sign of how bad the times are for refiners, Valero was unable to find a buyer for the 210,000 bpd plant. Lack of a buyer, even at a rock-bottom price, is interesting considering one bull argument that supports refiners: no U.S. refinery has been built since the 1970s due to the capital involved and regulations needed. The fact that no one was interested at any price may indicate more of these shutdowns to come. This refinery represented 7% of Valero's capacity.One can argue two points of view going forward: 1) Continued capacity curtailment and permanent refinery shutdowns will lead to a severe supply disruption somewhere down the road when the economy turns and demand for gas turns up, in which case a bullish stance on Valero and Tesoro (that trade below book value) is warranted; or 2) the demand for gasoline may be on a permanent decline curve as the growth of electric automobiles propels over the next decade. No positions.
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