This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Refiners Primed to Regain Pricing Power

NEW YORK ( TheStreet) -- Imagine for a moment, that you run a company that must sell its goods at a lower price point, yet simultaneously must pay more to produce this good. This seems like a reasonable cause to send a company's shares downward, which is exactly what has occurred with refinery stocks.

The rally in crude oil, coupled with muted prices at the local gas station, has created a troublesome environment for oil refining companies. Investors, though, have recently savored the gift of a run-up in oil prices; and consumers have welcomed the gradual slide in prices charged at the pump. As appreciated as this pairing is for consumers and investors, it's terrible for the refiners who must pay those higher energy input costs and receive the lower retail pump revenue.

We believe this trend is due to reverse shortly.

[Read: <a target="blank" data-add-tracking="true" href=""><em> <bracket> video </bracket> Dicker: Unlocking Shareholder Value in Energy</em></a>]

Crude oil (USO) prices have advanced along with other risk assets over the last several years, making notable and recent price leaps in reaction to the situation developing within Syria. As global economies lurch along, either organically or by the coercion of central banks, both commodities and global stock markets have rallied sizably.

During this time, crude oil, gasoline (UGA), diesel and heating oil (UHO) have all mostly advanced in step, until recently. It is this divergence that has sent refinery stocks into a tailspin.

Prices at the local gas station have begun to lose their high correlation to crude oil over the recent past. Gasoline has made a series of lower price highs since the summer of 2011, while crude hit a new high in August. Fortunately, companies like, have made pump prices readily available for all 50 states and most major cities.

Viewers can quickly see the price charts showing retail gasoline prices that have not tracked alongside prices of crude oil recently. Instead they have, on balance, been declining. Now, this is great news for U.S. consumers and their wallets, but not for companies such as Valero (VLO - Get Report), Western Refining (WNR) and Marathon Oil (MRO).

Lastly, the complications facing British Petroleum (BP - Get Report), which is still battling the repercussions from its 2010 Deepwater Horizon oil spill and the subsequent claims process, could be enough to remove it from a list of candidates for a portfolio.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
UGA $26.14 -1.40%
BP $31.42 -1.69%
IMO $31.40 -0.85%
TSO $76.77 -2.40%
VLO $56.15 -2.60%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs