Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
If Cost of capital is 8%-22% of the total value of the inventory then a refinery X with an inventory of $250,000,000 USD (5 million barrels x $50) would equal
$250 million x 15% = 37.5 million in annual costs
now, with the rise in price to $150 USD (5 million barrels X $150)
$750 million x 15% = 112.50 million in annual costs
Does this have any signficance in your profit margins, pup55?
Jim Cramer was asked about Valero on lightning round today:
"There was a 20 year period when the refiners didn’t make any money. Cramer thinks we could be “back in that game.” He would not buy Valero or any refiner."
Cera building a refinery costs index. The cost to build a refinery is up 76% since 2000. Not quite what I was looking for but maybe you folks find it fascinating.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Thu Jul 03, 2008 8:15 am Post subject: Re: Refining margins watch (was Tesoro)
NYMEX Crack Spread And Refining Margins
Counting the modest rises in gasoline and heating oil futures, the nearby NYMEX crack spread was whittled down a penny to $13.42 per barrel, yielding a gross refining margin of 9.5%. A month ago, the margin was 14.4%.
Seeking Alpha _________________ It's already over, now it's just a matter of adjusting.
Joined: Mar 20, 2007 Posts: 174 Location: There is no hope for the future
Posted: Thu Jul 03, 2008 8:42 am Post subject: Re: Refining margins watch (was Tesoro)
one of the flapping mouths on CNBC commented that, with crack spreads so low, some refineries will shut down production soon as there is no money to be made converting oil to petrol.
Dante, any comment as to what level the crack will need to reach before this happens?
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Thu Jul 03, 2008 9:07 am Post subject: Re: Refining margins watch (was Tesoro)
idomar wrote:
one of the flapping mouths on CNBC commented that, with crack spreads so low, some refineries will shut down production soon as there is no money to be made converting oil to petrol.
Dante, any comment as to what level the crack will need to reach before this happens?
The crack may not be as bad as it seems at first glance. Refiners have stepped up distillate (diesel & heating oil) production by 5% as compared to a year ago, and reduced gasoline output.
Based upon industry reports, they can't increase distillate production further at this time of year.
I don't know what the figures will be for this week, but I think the increase in distillate margins will offset most of the loss in gasoline margins.
Therefore I expect only a minor downturn in total refinery output this week and next. It was 89.2% last week, and my WAG would be 88.4% in two weeks.
A bigger problem will be a shortfall in Nigerian oil imports about July 15 due to problems in Nigeria a few weeks ago. Nigerian oil is about the best oil to get the most gasoline per barrel. _________________ It's already over, now it's just a matter of adjusting.
Joined: Mar 20, 2007 Posts: 174 Location: There is no hope for the future
Posted: Thu Jul 03, 2008 9:55 am Post subject: Re: Refining margins watch (was Tesoro)
DantesPeak wrote:
idomar wrote:
one of the flapping mouths on CNBC commented that, with crack spreads so low, some refineries will shut down production soon as there is no money to be made converting oil to petrol.
Dante, any comment as to what level the crack will need to reach before this happens?
The crack may not be as bad as it seems at first glance. Refiners have stepped up distillate (diesel & heating oil) production by 5% as compared to a year ago, and reduced gasoline output.
Based upon industry reports, they can't increase distillate production further at this time of year.
I don't know what the figures will be for this week, but I think the increase in distillate margins will offset most of the loss in gasoline margins.
Therefore I expect only a minor downturn in total refinery output this week and next. It was 89.2% last week, and my WAG would be 88.4% in two weeks.
A bigger problem will be a shortfall in Nigerian oil imports about July 15 due to problems in Nigeria a few weeks ago. Nigerian oil is about the best oil to get the most gasoline per barrel.
cheers dude,
crack spreads diminishing at the same time as oil imports doing the same thing and the storm forming in the atlantic..........next week could be interesting
Posted: Tue Jul 08, 2008 6:00 am Post subject: Re: Refining margins watch (was Tesoro)
Quote:
Crude Oil 139.17
HO 3.9111
RBOB 3.4316
Gap -0.4795
Ref Margin 16.4364 $/bbl
Ref Margin 0.3913 Cents/Gal
We have not checked in on this for awhile either.
We are down to only 16 cents, so the little period of glory is about over. In a couple of weeks, our refiners are going to start to announce 2Q earnings, which will be "ok" but the analysts will hate it.
All of the refiners were beaten up over the last week or so.
Posted: Tue Jul 08, 2008 6:03 am Post subject: Re: Refining margins watch (was Tesoro)
Quote:
Pemex, Mexico's state-owned oil company, has reduced the amount of crude oil it supplies to Texas refineries operated by Royal Dutch Shell and Valero Energy Corp. as falling production curbs exports.
The guaranteed amount of Maya oil for a Deer Park refinery, jointly operated with Shell, was cut by 15 percent, the Mexico City-based company said in a regulatory filing. Pemex also lowered oil supplies by 5.8 percent to the Port Arthur refinery of Valero, the largest U.S. refiner.
Separately, Pemex said output at Cantarell, the world's third-largest oil field, fell to an almost 12-year low in May.
Posted: Thu Jul 17, 2008 11:07 am Post subject: Re: Refining margins watch (was Tesoro)
Here's another segment from the financialsense Q&A ( 6/28 )
http://www.financialsense.com/fsn/BP/2008/0621.html#qcalls
===================
Hello, guys. Thanks so much for your show. Jim, I had a quick question for you. I was wondering what the fundamentals are of the refiners like Valero and Sunoco, those kind of guys, that they have been getting pretty beat up. Thanks a lot for any help you can give for that.
JIM: Right now, the crack spread – the difference between the spread on gasoline prices and the raw cost of oil – has narrowed, so the profit margins for the refiners has been narrowing. You know, what has happened is the price of oil has moved up much faster than the ability of the price of gasoline to keep up. But if you take a look at these and you're willing to hold onto these companies over a longer period of time, Valero especially –since it has the ability to refine heavy crude –you're talking about a company that has that capacity and we are far short of capacity here in the United States. So if you're willing to look beyond this short term event here because eventually, gasoline prices are going to have to go sky high. Otherwise refineries won't be able to make money. [9:20]
===================
Posted: Thu Jul 24, 2008 8:50 am Post subject: Re: Refining margins watch (was Tesoro)
Quote:
Crude Oil 124.86
HO 3.5700
RBOB 3.0393
Gap -0.5307
Ref Margin 15.4956 $/bbl
Ref Margin 0.3689 Cents/Gal
It's been awhile since we checked on this, and it really does not look all that good. Puplava is right, conceptually.
As long as the refinery margins stay low, these guys will defer maintenance, not do expansion projects, and take other actions which will of course have a long term impact on the overall refining situation.
The question of the day is.....
Would $3.50 gas bring people back into the market?
Right now, we are looking at about $3.70 average pricing nationwide if this pricing regime holds up.
Posted: Tue Jul 29, 2008 6:53 am Post subject: Re: Refining margins watch (was Tesoro)
Quote:
NEW YORK, July 29 (Reuters) - Valero Corp (VLO.N: Quote, Profile, Research), the largest U.S. oil refiner, reported a 67 percent decline in quarterly earnings on Tuesday as soaring crude oil prices translated into weak profits from gasoline production.
Net income in the second quarter fell to $734 million, or $1.37 a share, from $2.25 billion, or $3.89 a share, a year earlier.
Companies that refine oil to produce gasoline and other products have struggled to pass through record crude prices to their customers.
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