In its announcement, Valero recited a litany of troubles:
The second quarter 2013 refining segment earnings are estimated to decrease versus the second quarter of 2012, primarily due to significantly lower discounts for heavy sour crude oil, higher natural gas costs, higher costs to comply with the Renewable Fuels Standard, and turnaround and maintenance activity at the Quebec City, McKee, Meraux, and Port Arthur refineries.
As the spread between WTI and Brent shrinks, the price for heavy, sour crude is not discounted as heavily and that forces Valero to pay more for the stinkier stuff. Because the heavy crude is more costly to refine, the company’s cost for fuel (natural gas) also rises.
Valero is also being hit by the rising price for renewable energy credits, known as Renewable Identification Numbers or (RINs), which soared from a few pennies to near $1 earlier this year, and have now topped $1 again. We discussed this issue earlier this year, but the short version is that demand for RINs has been inflated as the federal mandate for ethanol production now exceeds the projected demand. This forces refiners to buy more RINs than they need.
Archer Daniels Midland Co. (NYSE: ADM) and Valero are the two largest publicly traded ethanol producers in the United States and both will be hurt by the ethanol glut. Other refiners also are likely to see costs rise due both to the RIN issue and the closing differential between WTI and Brent.
Shares of Valero are trading down 3.6% in the premarket this morning at $33.36 in a 52-week range of $23.63 to $48.97.
Are You Still Paying With a Debit Card?
The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.
Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!
Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!
Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.