Valero Energy Corporation (VLO): US’s Energy Boom Will Not Change Anything

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Today, many newly discovered unconventional sources are very light, sweet, and easy to refine. Since our Gulf Coast refineries are still geared toward heavy, sour crudes, we will continue to import that grade to use in these facilities. In fact, one type of crude oil that is strikingly similar to Venezuelan and Mexican crudes is Canadian oil sands. Canadian oil sands are in desperate need of refineries capable of treating this heavy mix, and Gulf of Mexico refineries are just the type of refinery these crudes need. This is the driving force for Canadian pipeline companies TransCanada Corporation (USA) (NYSE:TRP) and Enbridge Inc (USA) (NYSE:ENB) expanding their takeaway capacity to the Gulf through the Keystone XL and the Trunkline conversion, respectively.

Even if the U.S. were to no longer “need” oil imports to meet its energy demand, it is more than likely that refiners will continue to process imported crudes provided that is the most financially lucrative option. It’s all a matter of what we can buy at the lowest price and sell for the highest.

Coal will still be a top energy source
It’s easy to be down on coal. Ever since shale gas started flowing in the U.S., many have speculated that it would replace coal because it was a more emissions-friendly fuel source and it was less expensive. While that may look to be the case (and several trends in the U.S. back it up), the truth is that coal will remain a dominant force in the energy game. To take it even further, the EIA estimates that coal will surpass oil as the premier energy source by 2017. This is in large part because of two factors: natural gas requires a robust infrastructure to transport, an infrastructure many developing nations do not have, and several countries have natural gas prices indexed to oil, so its price is kept artificially high. This is mostly how American coal company Alliance Natural Resources was able to post a record 2012 in both sales and production.

Admittedly, coal use is expected to decline severely. But just like in the case of America’s decline in oil consumption not affecting prices, America’s decline in coal consumption will not be enough to make a huge impact on global coal consumption.

What a Fool believes
For many years, America was the lightning rod for the energy industry. Today, it is becoming more and more just one cog in an extremely vast and complex system. Will the U.S. energy boom have a profound effect on global energy supplies? Absolutely. Will it send the world into a global supply glut resulting in exorbitantly low oil prices and make us the commanding force on supply? Probably not. The U.S. energy boom might not be the silver bullet for everyone’s energy woes, but remember that it’s getting better all the time.

The article U.S. Energy Boom Won’t Change Anything originally appeared on Fool.com is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool. The Motley Fool recommends Alliance Resource (NASDAQ:ARLP) Partners, L.P.

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