Valero Energy Corp (NYSE:VLO)
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North America’s largest independent petroleum refiner and marketer, Valero takes fuel from the distiller to the gas pump.
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North America’s largest independent petroleum refiner and marketer, Valero takes fuel from the distiller to the gas pump.
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Oil refining is just a bad business to be in, particularly for an American company. As refiners go, Valero is up their with the worlds best brands, granted, but buying it today would be like buying GM in 1980. They were up their with the worlds best car brands at the time, but domestic circumstances (union contracts, oil prices, environmental regulations, etc) doomed that company even as automobile sales took off.
Expect other people to refine the worlds oil in the future. It simply cannot be done efficiently in the US, given the political environment. Valero survives because it CAN refine, not because it is better. Once other people can, too, they will have competitive advantages over VLO.
If you remember, when refiners go in a sweet spot in crack spread as is happening now their profits surge and so too does their stock prices, in the last Sweet Spot, VLO hit $70's.
Today refiners are heavily shorted and a small increase in buying pressure can cause a panic short squeeze among the millions of shares that are short shares of the refiner sector.
Shares short as of Jan. 14th 2011
(VLO) 16.41 Million shares
(FTO) 8.26 Million shares
(WNR) 6.90 Million shares
(ALJ) 1.56 Million shares