HollyFrontier Corp (HFC), Valero Energy Corporation (VLO): Two Ways Cleaner Gasoline Will Help Refiners

2. Fanning the flames of exports
The proposed rules will normalize the quality of gasoline sold in all 50 states to that of California, Japan, and the European Union — all of which have taken steps to reduce impurities. Currently only 29 domestic refineries can efficiently produce in-spec gasoline and ultra-low-sulfur diesel for exports. Of that total, 20 are located in California for the state’s consumption. Imagine what the trend in exports could look like in five years when all refineries making gasoline have the ability to sell products internationally.

Source: EIA

Chevron Corporation (NYSE:CVX) and Valero Energy Corporation (NYSE:VLO), which own 37% of California’s refining capacity, were among the first to capitalize on the crack spread and refining efficiencies for exports. Many blamed the focus on exports for the spike in gasoline prices following a series of refinery outages in the state last summer. Executives shot back by saying that exports keep refineries “operating at high capacity, improving efficiency, and keeping costs down”. It seems a bit silly for them to change their tune now.

Essentially, the proposed rules would open up newer markets — and expand current markets — for American-made gasoline and allow more refineries to play the export card. Aside from international trade, the rules should also be welcomed news for California residents. The high volatility experienced in the state’s gasoline prices will become a thing of the past as more refineries are able to step in when problems arise.

Foolish bottom line
Mandating cleaner gasoline would be a rare win all around for public health, investors, the refining industry as a whole, and the economy. It would be just the thing needed to swiftly bring domestic refining infrastructure into the 21st century, which will be necessary to keep up with the volume of unconventional oil flowing out of the country’s veins. It seems that the refining industry should be extending an olive branch to the EPA rather than a list of grievances.

The article 2 Ways Cleaner Gasoline Will Help Refiners originally appeared on Fool.com and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends Chevron.

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