U.S. Oil Refiners Slump on Concerns of Lower Margins Due to Rising Renewable Fuel Credits

NEW YORK, NY -- (Marketwire) -- 03/14/13 -- Shares of oil refiners have slid this past week on concerns that rising renewable fuel credits would begin to pressure margins. The Environmental Protection Agency has propped refineries raising the U.S. ethanol mandate to over 14 billion gallons, compared with 13.2 billion gallons in 2012. Research Driven Investing examines investing opportunities in the Oil & Gas Refining & Marketing Industry and provides equity research on HollyFrontier Corp. (NYSE: HFC) and Valero Energy Corporation (NYSE: VLO).

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"There is a potential real stinker of an issue developing for US refiners on meeting obligations related to the US government's renewable fuels standard (RFS) that could materially impact earnings for many of the companies. The price of renewable fuel credits, known as Renewable Identification Number (RINs), has skyrocketed from under US$0.01/gal for ethanol in late 2012 to over US$1.00/gal this week, significantly increasing the cost of RFS compliance for the US refiners so far in 2013," Macquarie wrote in a recent note to investors.

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HollyFrontier is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. Through its subsidiaries the company operated 5 refineries with a combined capacity of 443,000 barrels per stream day. Shares of Holly Frontier have fallen over 10 percent in the past week. Macquarie has recently downgraded the company's rating to "neutral."

Valero and its subsidiaries' assets include 15 petroleum refineries with a combined throughput capacity of approximately 2.8 million barrels per day, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50-megawatt wind farm. Shares of Valero have declined roughly 7 percent in the past week. Macquarie has also downgraded the company's rating to "neutral."

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