Posts by Hoekstra Trading LLC
The 2021 OPIS conference and the biofuels contradiction
See the other posts in this series, Top 3 Takeaways: 2021, 2022, 2023, 2024 Any engineer attending a biofuels conference will notice an atmosphere filled with lawyers, accountants, lobbyists, and RINs traders. It is an interesting and educational but unfamiliar world for an engineer. Occasionally, the more familiar world of science, technology, and economics will…
Read MoreCVR Energy – another case study in low refining margins
Investors and analysts are confused about how to interpret low refining margins being reported this year. Much of the confusion stems from the confusing topic of RINs. I believe the low margins indicate a more fundamental weakness in the performance of many US refineries, which is inability to make enough on-spec gasoline from crude; and…
Read MoreUS retail octane value hits new high
Last week, the US average retail octane value (premium – regular gasoline price differential) hit a new high of 71.4 cents/gallon. This is the difference in pump price between premium and regular gasoline. If you fill your tank with premium today, you will pay, on average, 71.4 cents/gallon more than if you use regular. Record…
Read MoreStrange happenings in refineries
Strange things are happening in this refinery. Is anyone hurt? When will we have results of those catalyst analyses? What is really in those tanks? Where is my sister? Why does that French mathematician’s name keeps popping up everywhere? Who can I trust? When was the last time you read a novel all about an…
Read MoreWhat’s the missing piece in Phillips 66 refining profit problem?
Investors are puzzled over Phillips 66 (PSX) refining profits. Here is a comment from a PSX stock investor last week: “The 2nd quarter Pre-Tax Profitability Chart shows PSX’s refining business loss $729 million. This is perplexing as (i) Figure 5 indicates crack spreads were generally higher than crude costs for the second quarter (though that…
Read MorePoor refining profitability puzzles investors
An Aug. 16, 2021 article titled Phillips 66 Stock: Advantaged By Its Refining-Adjacent Businesses, by Laura Starks was published on seekingalpha.com. Below are excerpts of investors’ comments on seekingalpha.com Comment by Fwc3030 17 Aug. 2021, 7:31 AM Ms. Starks, Thank you for a well written over-view of Phillips. Your writing style is to be commended…
Read MoreToday’s octane economics
Because octane can seem confusing, consider a more familiar commodity, wine. Imagine you own a vineyard. You produce wine for $4/bottle, distribute it in cases for $24/bottle and sell it in your shops for $34/bottle. Your margin is $20/bottle for case sales and $30/bottle for bottle sales. A neighbor makes identical wine and sells it…
Read MoreRefining’s margin capture problem — here’s the hidden cause
A sore point in US refiners’ 2021 earnings has been low “margin capture” rates. Margin capture refers to actual realized margin compared to a market-based benchmark margin. For example, this chart from Phillips 66 (PSX)’s 2nd quarter earnings conference call shows a market-based benchmark margin of $17.76/barrel (left tan bar), and an actual realized margin…
Read MoreRefiners rebuffed again on RIN price pass-through
In an eight-year battle over Renewable Identification Numbers (RINS), refiners have failed to get much relief from their RIN obligations. Last Friday, July 16, 2021, an appeals court rejected their latest effort. The core issue was the “pass-through theory”, which says refiners’ RIN costs are recaptured in the market prices of the gasoline and diesel…
Read MoreHidden costs of Tier 3 gasoline hurt refiners’ gasoline production and profit margins
For the first time, US refiners are being challenged to meet the EPA’s Tier 3 10-ppm sulfur gasoline specification while making gasoline at full rates. This is causing an “octane/sulfur squeeze” which also puts the squeeze on gasoline production, crude flexibility and profit margin capture: Many US refineries are under-equipped to make Tier 3 gasoline…
Read More