Valero Energy Rides High Crude Prices to Refining Profits

Valero Energy's refining business is benefiting from high crude oil prices driven by the Iran war shock. West Texas Intermediate (WTI) is trading above $100 per barrel, increasing input costs for refiners like Valero. However, unlike many refiners, Valero has an advantage due to its access to diverse crude feedstocks and heavy-crude preference.

The company's Gulf Coast refineries can buy crude oil from low-cost sources such as the United States, Canada, and Venezuela, allowing it to keep refining costs low. This is particularly significant given that global refining capacity is constrained, fuel inventories are low, and demand for gasoline, diesel, and jet fuel remains resilient.

Valero's favorable business environment may also benefit other refiners like Phillips 66 (PSX) and Par Pacific Holdings, Inc. (PARR). PSX noted that there aren't enough refineries or products globally right now due to refining capacity being offline and fuel inventories being low, which is keeping refining margins high.