If gas is lower, the refinery will sell more gas. VLO dropped to 53.40 from 67.00. Is it a good buy?
2006-09-06 07:54:24 · 4 answers · asked by Kuntree 3 in Business & Finance ➔ Investing
As Nice_Guy said, price of the feedstock is just one part of the equation. All things being equal, lower oil prices are good for refineries. But all things are never equal. Refineries have to sell their product. If prices are low because demand is slackening, they may have to shrink their margins or refine less product.
Other factors include the weather (unusually hot or cold summer or winter), inventories (how much refined product is in storage compared to capacity), politics (is the Strategic Oil Reserve being restocked or depleted? is Congress likely to loosen laws relating to new refinery construction or make changes to other issues that affect the industry?), and natural disasters (is capacity reduced due to a hurricane?). Also, what is the business up to? Are they issuing new shares, are there any regulatory problems, etc.?
I wouldn't run out and buy Valero just because of the one factor you asked about.
2006-09-06 08:57:26 · answer #1 · answered by Y Answerer 6 · 0⤊ 0⤋
Not necessarily. Currently with high prices, wells that are not normally considered profitable are being turned on again as they are making money. With lower oil prices, the volume of drilling, exploration and wells actively producing will go down as there is less money to spend. With less new production coming on stream, the refineries will not sell more gas, but the gas consumption would have to go down or they wouldn't be able to meet the demand. High oil prices mean high demand. If the demand isn't there, the prices shrink and the refineries sell less (for example the recent drop is due to less demand over the peak summer season).
2006-09-06 15:01:03 · answer #2 · answered by Nice Guy 3 · 2⤊ 0⤋
In answer to your first question, sure - buying more gas would ultimately be good for refineries. It doesn't look so good to stock holders, however, and every decision is made with their best interest in mind.
2006-09-06 14:57:43 · answer #3 · answered by Clarkie 6 · 0⤊ 0⤋
I dont know but my damn schlumberger is taking it on the chin, i should have sold this turkey in may...if i wait i will be stuck with it for years until it "recovers"
2006-09-06 18:31:15 · answer #4 · answered by Anonymous · 0⤊ 0⤋