April 22, 2002; Refining Margin Also a Buy

In some respects, this is the best time for the U.S. refining business in forty years.  While the refiners did reasonably well during the high-energy growth 1960s, the downstream business had a tough time with higher oil price in the 1970s.  It has been a long comeback in the 1980s and 1990s compounded by complex environmental regulations.  Now capacity is tight and consolidation has put that capacity in stronger hands.  Thus we are optimistic that higher margin days are here for a while.  The crack spread calculated by subtracting futures prices for three barrels of crude oil from two barrels of gasoline and one barrel of heating oil is in an up trend on the chart.