Oil prices have been falling for over two years. So why are refining stocks booming?
Valero is up nearly 50% since September 2024.
Marathon Petroleum Corporation and Phillips 66 aren’t far behind.
Meanwhile, E&P stocks have lagged, trailing their refining peers and the broader market over the past 18 months.
The explanation comes down to where you sit in the supply chain.
Refiners don’t make money on oil prices. They make money on the spread between crude inputs and finished product outputs: gasoline, diesel, jet fuel.
And that spread has been widening steadily even as oil prices drift lower.
Why?
A wave of US refinery closures has constrained domestic product supply just as global crude supply has grown.
While the US is producing more oil, refiners are not processing a proportionally larger volume.
In my newest post Foundations of Energy, I walk through the market dynamics behind this divergence: crack spreads, refinery utilization, capacity retirements, and what it all means for how these two oil & gas segments get valued differently by the market.
Full post here.
