uploads///Gasoline Prices

Analyzing the Refining Margin and Capacity of Energy Companies


Jan. 11 2016, Updated 3:05 p.m. ET

Refining margin

The refining margin of Philips 66 (PSX) in 3Q15 was $9.9 per barrel compared to $15.1 per barrel for Marathon Petroleum (MPC). Downstream business contributes more than 65% toward the net income of Phillips 66 on an average basis. The refining margins of Valero Energy (VLO) and Tesoro (TSO) in 3Q15 are $11.3 and $12.7 per barrel, respectively. For TSO, 95% of revenue comes from the refining business. Comparatively, VLO derives 93% of its net income from the refining of crude oil and around 6% from ethanol. The graph below shows gasoline prices in different geographies of the United States.

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The refining margin of Alon USA Energy (ALJ) in 3Q15 is $24.3 per barrel. Refining margin is an important indicator that determines the profit levels of the refineries. The margin is measured by taking the difference between the wholesale prices of refinery products and the cost of the crude oil that the products are extracted from.

Refining capacity

Valero has the highest refining capacity of 2.9 million barrels per day (or MMbpd) compared to the 2.3 MMbpd for Phillips 66. Additionally, MPC, TSO, and DK have refining capacities of 1.7 MMbpd, 0.85 MMbpd, and 0.07 MMbpd, respectively. TSO operates six refineries in the western part of the United States. In 3Q15, Tesoro’s capacity utilization was 97%.

The output of Tesoro includes 0.43 Mbpd of gasoline and 0.32 MMbpd of distillate. In comparison, PBF Energy (PBF) produces 0.21 Mbpd of refined gasoline and 0.16 MMbpd of distillate. The distillate includes jet kerosene, diesel, heating oil, and vacuum gasoline.

TSO, PSX, VLO, and MPC have individual weights of 2.9%, 3.4%, 3.3%, and 1.9%, respectively, in the Energy Select Sector SPDR Fund (XLE).


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