Two Opinions On Valero/Premcor

Lynne has a post up about Valero's purchase of refiner Premcor. She says

The press on the Valero/Premcor deal seems to hit all of the right notes; I would add to this article on demand continuing to outstrip refining capacity that one of the stated drivers of the acquisition is the less-than-efficient utilization of Premcor's major refineries.

While there is an EPA green light for a new refinery in Arizona, it's the only one I'm aware of. Long lead times on construction combined with shaky or declining oil supplies should mean margins will remain fat for a while.

Geoffrey Styles labels the combination a potentially risky "one-trick pony" experiment, noting the combined firm will own 13% of U.S. refining capacity but will have no high profile brands. It's almost a pure play in the refining business, one he thinks is at risk of another wave of EPA regulation or weakening margins. As I said before, I doubt the latter is a possibility, and the former a distraction therefore.